After missing payments to investors, three companies in the P&R Group have filed for insolvency, sounding the end of its 42-year old business model.
The concerns expressed by German financial analysts over the business of the P&R Group have proved to be well founded. Earlier this week three companies in the P&R Group filed for insolvency in Munich. The companies are P & R Container Vertriebs- und Verwaltungs-GmbH, P & R Gebrauchtcontainer Vertriebss- und Verwaltungs-GmbH and P & R Container Leasing GmbH. It is important to note that P & R Transport-Container GmbH and the other companies of the P & R Group have not filed for insolvency.
On March 19 the court appointed Dr. Ing. jur. Michael Jaffé as provisional insolvency administrator of P & R Container Vertriebs- und Verwaltungs-GmbH and P & R Gebrauchtcontainer Vertriebss- und Verwaltungs-GmbH. Attorney Dr. jur. Philip Heinke, also from the law firm JAFFÉ Rechtsanwälte, was appointed provisional insolvency administrator of P & R Container Leasing GmbH.
The insolvency has caused a massive stir in Germany, with the newspaper Handeslblatt Global calling it “one of the biggest financial scandals in modern German history”. Though P&R is well known in the container industry and with a fleet of 1.2M TEU is a major container owner, it seems that the company’s German investors new little of the container business.
In particular investors, it seems, were unaware of the age of the containers they were buying. Rather than owning shares in P&R group companies, investors “bought” containers and P&R rented them back for three and five year terms, with a non-contractual commitment to purchase the containers for 65% of their initial cost at expiry. P&R never offered spectacular returns (rental returns ranged from 3-5% per year) and investors believed they were participating in a low risk business that was part of the bedrock of global trade.
For reasons that are yet unclear late last year P&R Companies were late making rental payments and the whole model started to unravel. Some of the 51,000 or so investors who own containers are now starting to panic. Handeslblatt Global cited an example of Sabine Schubert, a 74-year-old pensioner from Kiel, who bought 10 containers in 2005 for €23,000 and has now just discovered under her contract she could be liable for storage and/or recycling costs associated with those containers.
The administrators have brought in PricewaterhouseCoopers to audit the companies, examine contracts and inventory assets, after which point it will decide what course of action to take. The reality is the real value of the assets will be significantly lower than investors believe and a sale will be difficult. The administrators stressed that their priority at this point is to secure the rental income stream.
The administrators also warned investors that trying to take possession of their containers or sell them individually is not a practical or economic option. “Regardless of the legal valuation, individual exploitation on the market by investors is virtually impossible. Also, containers that are in use all over the world can not simply be picked up by investors for actual and cost reasons. Any attempt in this direction would cause significant harm, which can go to total loss, and thus run counter to the interests of investors.”
Due to the large number of investors involved the administrators have set up a website where they will post further information (in German) www.frachtcontainer-inso.de