Seeing the glass as half full when trouble's brewing

Ian McKerron

A NEW firm's unique approach to debt collection is reaping rich rewards for the brewing industry while preventing the shutters coming down on scores of Scotland's beleaguered pubs and clubs.

One80, a division of Glasgow-based credit management and financial services outfit BCW Group, is attracting growing interest among banks and other major lenders with its ability to recover debt while keeping debtors afloat.

Barely 18 months old, the company has turned on its head conventional thinking about bad business debt.

"Our philosophy is based firmly on the premise that the traditional remedy of insolvency and litigation should be absolutely the last resort. We try to create a win-win situation where the lender gets his money back and the borrower remains in business," said One80 managing director Jarlath McHale.

The firm, whose name reflects its goal of turning round ailing businesses 180 degrees, is enjoying extraordinary success in the brewing industry, currently managing a fifth of the total brewers' loan portfolios in the UK, amounting to £160m. It also holds loan portfolios for four High Street banks and a number of smaller ones, worth a further £40m.

Business has arrived rapidly since brewing giants Bass decided to hand over its entire £90m loans portfolio to One80. Since then, a fifth of the cases have been revitalised, Bass's costs reduced by a third and 21% of all outstanding loan balances have been paid back within 12 months. One80 also handles the loan portfolio for Tennents and is in talks with Scottish Courage.

The firm sends in small teams of 'financial paramedics' - people with experience of banking, marketing and the leisure and licensing trade - to identify struggling businesses' specific problems and lay out a detailed recovery plan. It will often require a further injection of cash but in most cases lenders are willing to make the short-term sacrifice to secure the long-term repayment of outstanding debt.

McHale, 43, an Irishman who formerly worked for Bass as a senior management executive, believes One80's customer-friendly approach could spawn a potentially huge market.

"We have been focusing largely on the brewing business because it has long tradition of money-lending and that is where much of our expertise lies. But the banks are beginning to sit up and take notice and there is no reason why our approach could not be applied to virtually every other area of commerce.

"If we get in early enough it is possible in nine out of 10 cases to turn a business round so it can repay its debts and go on to prosper as a successful operation.

"Too often, lenders have moved to wind up a business without considering the practical options for improving cashflow and turning it around."

The firm has teams in Glasgow, London, Leeds, Manchester and Birmingham and pulls in income of around £2m a year, with fees based on results. "If we do not perform we do not get paid," said McHale. "It is a mark of the confidence we have in this new philosophy and our ability to put it into practice that we scale our fees in this way.

"The secret is to get in on the ground-floor. If that means putting people in to pull pints and literally run a pub or club for a while to get a feel for how it can be turned round, then we'll do it. We think we've struck a winning formula."

Paul Thomas, Bass Brewers' finance director, said: "Outsourcing to One80 ensured we better addressed the challenge of assisting those customers facing trading difficulties. The emphasis is very much on regenerating businesses."