thanks for the news

here is a quick translation from google

"Marklin will make a profit without help

BERLIN (dpa-AFX) - The model railway builders Märklin could bankrupt without outside help return to profitability track. "We think of an insolvency plan for," said administrator Michael Pluta the "Tagesspiegel" in Berlin (Monday). If the creditors agree to a sale to an investor, first from the table and would Märklin could try to rehabilitate themselves.

Is also possible to transform the ailing company into a public company in Göppingen. "Everybody wants it continues," Pluta said the newspaper. "The employees are highly motivated." He believes the bankruptcy creditors for open-minded. With them Märklin has around 93 million debt.

Märklin had filed bankruptcy in February 2009. From April 2009 to February 2010, the traditional company posted a profit again, but before interest and taxes (EBIT) of 12.4 million. The turnover was around 90 million euros."


does this mean they just can't find a buyer

....during this time there were some shops with empty shelves because Markin didn't deliver what has been ordered. Inside Germany everything seemed to be OK. Outside Germany,in 2009, shops were badly stocked.
I hope 2010 is better.

What was the latest price thrown out for Marklin...I seem to remember 60 million euros...is this correct? That was what they were asking?

Regards,

Bill

If Marklin company don´t needs an buyer,then in case good!
But Marklin must keep in remind that economy is still in bad situation.
I hope Marklin will survive,by cleaning up inside of company!

90 million euro in debt is an enourmous sum (well, relative to their earnings at least) If creditors wrote some or all of it off, there is some value there but otherwise forget it.

To take a very similar expample in a very different industry:

MV Agusta Motorcycles has been in dire financial straits for some years now. They have a lovely product and a fantastic "brand", of which the value far surpasses the value of its products to a suitor. It was sold a few years back for only 1 euro, but the buyers had to take on 120 million in debt. The owners just couldn't make it work, and sold to Harley Davidson for a similar arrangement. Harley's intentions were to sink some money in and at least get some product developed and selling, (and equally important use MV's european storefronts for HD and Buell products) but now they too are trying to unload it again as the cash they could have spent on MV has evaporated along with Harley sales. Keep in mind it takes far fewer high end motorcycles to pay back 120M than it does start sets and BR44's...

The point is the same, with that kind of debt the buyer must be someone who can swallow the debt, or have a magical secret to sell a LOT more trains and there can't be many of those around right now...

Well, if Marklin is producing positive EBITDA, this is all that matters right now, since it proves that in the long run the company is able to repay its debts to its creditors. That alone means that the prospects are very good for the company. As I am working in this industry (turning around companies) I would say that I am rather impressed with the financial progress made by Marklin the last year, considering of course the starting point when Mr. Pluta took over and the mess that the PE firm left behind. If I was a creditor of Marklin I would have given my full support to the current management to continue in this direction, even in the case that Marklin would have to delay my payments for a certain period of time.
Good luck Marklin and my congratulations to Mr. Pluta !!!

As we all respect Mr Michael Pluto's attempts to rescue the company and to some degree has succeeded.
He has taken a second step of trying to sell the company, sofar without success.
He has succeeded to turn around the profit margin and overall sales and reduce debth.
What more can he do ?
As he suggested: Public company.
Creditors:They are in the middle of a sandwich.
If the company goes down: good buy to their money owed.
To agree for any other solution, there is a better chance of getting some money back.
In my opinion the creditors & suppliers are in a loose loose situation and have no option.
If they say yes to any future agreement they loose and if they so no to any negotiations they loose.

What are Mr.Pluta options? to carry on as usual and reducing the debth at a snail pace.
To sell the company: Who wants to inherit a massive debth
A public company ? Anything could happen.

To carry this amount of debth, although it is frozen at the moment, with the uncertainty of the world market and a volatile economy, is in my eyes and ears running down a very very risky path.

the companies which survived the last crash had very debth on their hands.

John

TimR,
your calculations are right. Let's assume now that Maerklin does 130-140 million euros sales in current 2010 year. What would be then the EBITDA ??? Much much better !!! And the possibility to re-pay the debts??? Much bigger !!! And the creditors and suppliers position and feelings, as river6109 correctly points out ??? Even far better.
There is only one equation which is the most important in turning around companies, and this is valid ALL over the world: To achieve a.s.a.p. positive P&L (Profit and Loss). That's it. Nothing else. Then, you can relax, and start re-negotiate with everybody in a much more comfortable position. And this is EXACTLY what Mr. Pluta has achieved.
Akis

P.S. to Mr. Pluta: Could you please come to rescue also my country, Greece, when you finish the job with Maerklin???

mvd quote:


Thanks Michael,
the above is also very important, since a slow recovery re-assures also a much better stability with the workers and probably their unions, which also reflects in higher productivity, efficiency, and finally better profit margins.

Dave,
I also partly agree with you. An IPO (Initial Public Offering) through listing in a Exchange is dificult right now and with the current financial climate. Although, in the past, a lot of companies with much worse financial results, especially overall debts, were able to raise cash in alternative markets such as AIM in LSE.
I also agree, that IF sales are not risen, then it would have to take much longer time to decrease debt. This, of course, will worsen the position of creditors, and perhaps the future position of the company, if, and only if, the company has to go again to the banks to borrow money. Otherwise, bad luck to the creditors who would have to wait far longer to get re-paid. BUT, I recall, that Mr. Pluta also announced, a time ago, that he lost also a 15-20 (???) million euros sales last year because of a mishandling with one of Maerklin's Chinese suppliers (if I recall correctly). This proves that the Company, HAS the ability to increase sales. As a matter of fact, and taken into account that 2009 was one of their worst years in sales, I would not be surpised if we see sales approaching 130-140 millions euro in 2010. And I think, this is exactly Mr. Pluta's bet for this year.
I honestly admire the guy for the job that he has done so far.
Akis

Come on, Akis - as a insider & venture capitalist you know better ...
Greece never needs Pluta. Since by now they're selling their brand new treasury bonds like sliced bred

Akis. I think the problem Marklin has in trying too increase sales is that model rail is a diminishing market and with the present constraints and increase in taxation even most enthusiasts are spending less.
Interesting you mention the AIM market in the UK. I assisted several firms in this but Marklin would not be anywhere near being accepted and I presume it would be the same in Germany.
The only two options that I can see is to find a buyer (MR Pluta does not appear able to do that) or ask the creditors to write off the sums due (or accept a form of repayment over a 10/15 year period)
Failing that I dont see how they can remain in administration without a time limit.
The toy market in general is poor and only computer type games sell fairly well and even they have to be good and new items brought out on a rgaular basis.
Although I do not know how Brawa are doing I like the way this firm treat their customers (I am sure there will be an exception lol) and I would like to see a smaller Marklin combine with them. This would allow HO and N to be produced without the need for Trix and Z and 1. They could work from one factory and the Era 1 models from Brawa would be a good addition to the Marklin range.
All we can do is wait and see if somebody with more cash than sense buys the firm and I know there are people like that out there so lets hope for the best and meanwhile support Marklin with our purchases.

dave

David,
all the points you have raised are actually valid. But, they all relate to the strategy Maerklin should take in order to a)increase sales and b) safeguard their future in their respective market. So, I agree with you, and I would like to hope that the current management of the company are spending already hours and hours around table designing this strategy and studying month by month, all the developments and the trends in the MRR market. And in studying this, the points you raised about <diminishing market>, <increase taxation> and <less disposable income of the consumers> are ALL three the most important factors today in designing strategies for the retail market.
So, again, it's a question of increased revenue, and if we knew, for e.g., the financial results of their Q1, then we could have a more accurate estimation if Mr. Pluta is succeeding or not.
And of course, in the case where Maerklin's sales for 2010 are not significantly higher than 2009, then what you are saying about creditors writing off some of the total debt is also very possible (they call it nowdays <haircut> !!!).
In Greece, for e.g., Wind Hellas, the 3rd GSM mobile operator, few months ago decided to re-pay its low security bond holders ONLY 12 cents to the dollar, and the company wrote off 1,8 billion euros debt !!! Yes, 1,8 billion euros!! Of course, this is depending also of a lot of details w.r.t. the relevant clauses in the loan contracts signed, etc. etc.
Now, your point about the time limit of the Administration, is quite interesting !! I know what is happening in US with Chapter 11, also what is happening here in Greece with the equivelant Chapter 99, but a have not a clue with what is happening in the German law. Probably some German friends could inform us if there is, or not, a time limit for the period which Mr. Pluta can stay in charge.

John Black,
I wish that my country will be able to come out of this mess without the help of such people, but looking today at the demonstrations in central Athens and the guys from IMF with the laptops entering the Ministry of Finance, I very much loose my faith...

Akis

Hi Dave,
certainly in a Chapter 11 situation, the Court usually give you very limited amount of time, usually few months, and you have to come up with a viable plan which has to be voted by the creditors. Even after that, you are very close monitored (month-by-month) for your progress and the ability to carry out the implementation of the voted plan.
I think by the time Maerklin went bankruptcy were about 720 creditors with total claims of approximately 120 million euros. The major creditors among them were the company's main bank Landesbank Baden-Wuerttemberg and the Kreissparkasse Göppingen local bank, as well as, some pension funds like the IG Metall Union. So, I assume, they will be more relaxed on Maerklin, than possibly other institutional creditors.
Again, you are correct saying that cutting the fat, as well as, diminishing activities/product lines with minimum or negligible profit margins is of paramount importance. I believe Pluta has already fired 400 workers and now are around 1000 workers left, according to earlier press releases.


This is exactly what we need right now !!!

Akis

Come the revolution...

river6190,
I can tell you thousands of healthy companies with debts equal or even higher than their total revenues!!! And also a lot of cases where people bought such companies and succeded. It is a very dificult job for Mr. Pluta to turn around Maerklin, but in my personal opinion, he is moving to the correct direction, and also, the first announced financial results are encouraging. The final outcome?? Nobody knows !!! Only time will show if he is going to succeed.
Akis

There is a niche in the market for every scale Marklin produces, but priority should be to get the production in line with demand.

Z gauge has always been popular, HO is their bread and butter, gauge 1 is the "elite" range, Minitrix serves the large N gauge community, etc...They are all important and sell well in the right proportion.

I think recently there has been a real effort to cut back on the waste and produce models which will be snapped up by the modelling public. This is shown in the fact that a profit is being made again.

I agree I like the way Mr Pluta has handled the company. The interviews that I have seen him in, he seems to really enjoy running marklin and want it to succeed. I think that is why he has done so well with it, I think he has reestablished the foundation of the company, I just hope time does not run out and the courts force something bad to happen.

I think as said .. time will tell. Marklin is bust and either will be sold, the creditors will write off their debt or the firm will cease to exist. This presumes there is a time limit on administration or does Mr Pluta keep on going until he retires and another administrator takes over? I expect there must be a time limit.
Apologies to our Z friends as my comments are only from a business point of view. As a Marklin fan I am quite happy for them to keep going the way they are forever.

dave

Nope, my King. WE are # 1 !!!

Hi John. You could well be right that the debts will be written off. Somebody could come along and maybe make an arrangement with the major creditors to repay over a long time at a certain sum per year.
Much depends on how much the name Marklin means in Germany.
My own Bank here is Australian owned and did not get a penny from the government ... they has they sense not to get too involved in buying debt which was bound to go bad.
Must be hard working for Marklin and not knowing what the future will hold.

dave

Hi river6109,
it is not from my personal knowledge but you can see the financial statements of many public companies in European and US Stock Market which have debt to sales ratios close or bigger to 1, and can operate succefully producing positive free cash flows. Märklin is not in bankruptcy, but in a protection mode from bankruptcy. The only problem right now with Maerklin is that Mr. Pluta has to leave at some certain point in time, and a new owner/shareholder has to take over. Do you really want my hard guess?? As very syccefully our friend John Black points out, look at the major creditors!!! What about converting the debts to equity (especially the debt coming from the LOCAL banks) and the Banks-creditors become the Bank-Shareholders?? Their chances to get their money back increases since the free cash flow also increses and so the profits and the dividents to shareholders ! Of course it is just a hypothesis!! So, there are solutions for Maerklin now. More important are now, I think, the strategy, their product lines, as many of you pointed out, the market share, etc., than just the debt.

Akis

PS to John Black: John, I just, few hours ago, watched our PM to call for a bailout to Greece...

Simply put, Marklin is a cash generator for the whole area and the creditors are the banks, that are partly owned by the municipality, then if Marklin cease to exist, Goeppingen will became a ghost town like those in the US after the Gold Rush finished.
For the Unions, I completely agree.

Yes... to build train models there are economic choices and qualitative choices....
SDS is a choice in terms of quality...(qualitative choice)
Railbus with plastic body is pure economic choice...(in terms of work & manufacturing metal is a more expensive choice, at least in the way choosen by Marklin)

The reason why I choose Marklin : I feel that for a same price, Marklin still gives me more...

Hi Roland,
my comment regarding Hornby is purely on how it was properly managed to achieve profitability.

It is a fact that the more expensive Marklin clearly generates more than twice the sales ($$) as opposed to Hornby. Actually Marklin total sales is almost equal to the next three largest European MRR manufacturers combined - so in general, as you say, the market still prefer the qualitative choice.

Isn't it sad that despite their strong market position, Marklin could not make a decent profit?