Businessman to go on Hunger Strike in protest against ‘ruthless’ Scottish bank, CYBG PLC – Clydesdale Bank – Virgin Money
Former property agency chief says CYBG PLC (Clydesdale Bank) broke ‘his £10m business and ruined his life’
Hunger Strike – starts 17 March at Clydesdale Bank HQ – St Vincent Place, Glasgow.
“I am going on hunger strike because people need to know what the Clydesdale Bank has done to small businesses all over Britain. This is one of the great scandals of our times. The Clydesdale adverts say, “Here for You”. What a joke. ‘Here for you’ means they took my business, they stole every one of the 150 properties I owned, they bankrupted me and now they want to take what’s left – my home”.
- From scratch starting in 1998, John Guidi built a property business in the West of Scotland to a portfolio of almost 150 properties. The Clydesdale Bank backed the business from its very beginnings. He was wined and dined by the bank chiefs as ‘a model customer’ for years.
- “Lord Sanderson, the former chair of Clydesdale, had me for lunch in his offices overlooking Edinburgh Castle. The wine was so fine. Years later all that turned sour. They sold my debt to an American vulture fund – Cerberus. Cerberus is the three-headed dog from Greek Mythology that guards the gates to Hell. These fine pillars of the business community have set the financial dogs on me”.
- The road to disaster started when Clydesdale Bank changed the structure of his loans in 2002 – introducing him to the Tailored Business Loan (TBL) or Time Bomb Loan as it is known. The Treasury Select Committee in the UK Parliament branded these loans as mis-selling under false pretences, on an industrial scale and on terms which ordinary business folk could never understand.
- In 2010 Guidi started negotiations for his biggest loan – £1.6m for a land and property deal. He drew the first tranche of £600,000 in August 2011. Then the final tranche in November 2011. Six weeks later, in January 2012, he got a phone call from the Clydesdale saying all his loans had been frozen.
- “This was the Clydesdale Tailored Business Loan meets the Sub-prime banking scandal in America of 2008. Rapacious profiteering and asset stripping had come to town and it took me for everything I had because I missed the fine print. These people don’t have a shred of decency in their bones. They knew they were getting me to sign up for the Armageddon of my business.”
- The Clydesdale was owned at this time by the National Australia Bank (NAB) who introduced the TBL. To bring the so-called defaulted debts in it created a Strategic Business Unit. This was the Clydesdale’s equivalent of the RBS’s notorious “give them enough rope to hang themselves’ GRG.
- Then, in 2014, the Clydesdale/NAB sold all its TBL debts to Cerberus – an American private equity business or to use another name ‘a vulture fund’. John Guidi was not told that by the Clydesdale until the late summer of 2015. He got a letter from the Clydesdale saying he had breached a condition of the loan and they were selling his debts to Cerberus.
- Cerberus is a private equity company based in New York which specialises in large scale asset stripping and debt collection.
- Cerberus is also a holding company for several other debt collecting agencies. The one which bankrupted John Guidi is Promontoria Chestnut, based in a Dublin tax haven. They put John Guidi’s two property businesses into receivership on 22 December 2015.
- To date, Cerberus/Promontoria Chestnut have sold off almost all the property portfolio in John Guidi’s companies.
- “If you wanted a definition for asset stripping this is it. What I have put together in my business sold down the river for half its value so the grasping bankers can get their greasy hands on cash. They have sold off my business for £8m as far as I know and it’s worth double that.”
Summary of the case of Mr. John Guidi (former Director, Fieldoak Ltd and Lightfoot Ltd)
by Dr Fiona Sherriff, Director of Communications, APPG on Fair Business Banking.
Summary of the case of Mr. John Guidi (former Director, Fairoak Ltd and Lightfoot Ltd) by Dr. Fiona Sherriff, Director of Communications, APPG on Fair Business Banking
Mr. Guidi is a property professional with over 30 years’ experience in the business. He grew his portfolio of 150 rental homes in Scotland in the traditional way with help from high street banks, latterly Clydesdale Bank, now CYBG plc.
After a previously healthy banking relationship, Clydesdale Bank decided to ‘pull the plug’ without warning in 2012 even though Mr. Guidi had never missed a payment. This triggered a cascade of events which led to Mr. Guidi’s bankruptcy.
His asset-rich companies were systematically dismantled by Clydesdale who sold his remaining facility to the ‘vulture fund’ Cerberus in 2015. They stripped all his companies’ assets by selling them at below market value and he is now fighting to prevent his family home being taken.
This tragic case illustrates the vulnerability of UK businesses to abusive treatment by lenders and vulture funds and the inadequacy of current regulation in preventing it.
John Guidi is a self-made entrepreneur with a background in estate agency, lettings and property investment. He built up his businesses with his brother over 30 years with the assistance of bank finance. The investments were designed to be Mr Guidi’s pension. Clydesdale Bank appreciated this and initially supplied long-term lending facilities.
In 2004 Clydesdale (then owned by National Australia Bank) were expanding in the UK and were actively pursuing the commercial real estate business through the sale of Tailored Business Loans (TBLs). The Guidi’s were persuaded to take a series of these TBLs, most of which were ‘hedged’ with the idea of keeping monthly payments down. The TBLs were short-term to take advantage of the interest rate environment and the Guidi’s agreed to them on the assurance that they would be renewed on a rolling basis which is indeed what happened over the next few years. Sometimes, as part of a refinancing package, loans were terminated early which incurred ‘break fees’ but these charges were just added to the new lending each time.
The businesses thrived and grew. The Guidi’s were great customers and had a close relationship with the bank. They were obviously valued and were frequently treated to corporate hospitality. At the end of 2011, they drew down funding for a development project.
In 2012 everything changed. National Australia Bank, the parent company of Clydesdale, informed its UK commercial real estate customers, including Mr. Guidi, that they were withdrawing from the sector. This didn’t just mean that they stopped new lending, it also meant they wanted to get rid of existing loans as soon as possible. They, therefore, initiated their very own ‘dash for cash’ (the phrase which has been used to describe RBS’s fund-raising/asset- stripping activities), targeting asset-rich people like Mr. Guidi.
Clydesdale engaged in an activity known as ‘covenant squatting’ – actively looking for excuses to call loans in using small print in the contract. In the Guidi’s case, they managed to find one. They identified a ‘technical breach’ in the rental cover covenant. This did not affect the health or prospects of the businesses at all, indeed no monthly payment had ever been missed and the company was doing better than ever, but it was enough to start calling the loans in.
Gone was the trusting relationship that had existed between the Guidi’s and Clydesdale. Clydesdale knew the business was strong but they were no longer motivated to nurture it to long-term success and focussed instead on the short-term exploitation of the Guidi’s ’ equity and assets.
Mr. Guidi tried to refinance his £10million with other lenders but in 2012 the UK was in the middle of a recession and it was impossible. The bank changed the lending to an overdraft with extremely high interest rates. They told Mr. Guidi to start paying down his debt by selling properties, which he did over the next 3 years, raising £800,000 which went to the bank. He also continued his refinancing efforts and obtained an offer of £6.7million which he put to Clydesdale but this was rejected.
When the development land was sold he asked for the associated personal guarantee against his home to be lifted. To his horror, he was told that the guarantee was not just for that project but over the whole of the company’s lending.
During this time the Guidi’s realised that some of their hedged TBLs had been mis-sold to them. The loans had embedded derivatives which had earned the salespeople at the bank huge profits and had cost the Guidi’s more than they realised. As a consequence, they received over £100,000 compensation for the mis-selling of complex TBLs. They had also overpaid interest and incurred break fees on some fixed-rate TBLs but they have never been able to claim this back.
In 2015 Clydesdale finally washed their hands of their previously celebrated customer. They sold his debt facility, along with a tranche of others, to a ‘vulture fund’ called Promontoria (Chestnut) Ltd, a subsidiary of the notorious Cerberus Capital. Promontoria is based in Ireland and are not licensed for banking activities in the UK, and are completely unregulated. They are simply debt collectors and they pursued Mr. Guidi aggressively. He tried to negotiate with them and re-offered the £6.7million settlement but they also refused.
3 days before Christmas 2015 Promontoria put the first of Mr. Guidi’s companies into administration causing significant distress to him, his family and also his tenants. Ignoring that many of his tenants had been in their homes for years and that some were elderly, Promontoria treated them in an appallingly heavy-handed way and threatened them with eviction.
Mr. Guidi had a valuation of £12million on the portfolio from the surveyor who had previously worked for Clydesdale. Regardless of this Promontoria’s administrator sold the assets for £8million to an undisclosed company which employed the same solicitor as themselves.
Promontoria made Mr. Guidi bankrupt in 2017 and are now pursuing him for the personal guarantee over his family home. He has made eight court appearances trying to fight Promontoria and at the time of writing is on hunger strike outside CYBG headquarters in Glasgow.
This is yet another appalling example of the lack of protection available to businesses in the UK. Commercial lending is an unregulated activity, leaving businesses at the mercy of their lenders and onerous one-sided contracts. There is currently nothing to stop banks assigning loans to unregulated offshore companies and stripping their assets.
Selfish short-termism by the banks has an immense impact on the lives of businesspeople, their employees, their suppliers, and the economy. This is an appalling situation which cannot be allowed to continue.
- David Duffy CYBG Virgin Money, Broken Bank Broken Promises
David Duffy, pictured, is the chief executive of Clydesdale Bank. Jim Pettigrew is its chairman. All John Guidi wants is a fair say before he loses his house. He wants his case and a few others to get a fair hearing with CYBG. So far no-one at Clydesdale nor Cerberus has spoken to him about his pending eviction from his home in three weeks.
“Is this what we have come to. Scotland’s most historic bank hiring American private equity hitmen to carry out financial midnight stabbings without a word of negotiation.
Cerberus – SHAME ON YOU.
Clydesdale; CYBG plc – SHAME ON YOU.
How do these people sleep?’
The Hunger Strike at CYBG PLC / Virgin Glasgow offices
“I have had enough. I have nowhere else to turn. My case deserves justice. I am prepared to go on hunger strike until I get it.”
17 March 2019
Contact John Guidi firstname.lastname@example.org