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jargonking

Revell Under New Management after Hobbico Bankruptcy

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45 minutes ago, Chimpion said:

It could also potentially get messy regarding assets and liabilities in the different companies. It's possible in theory to move all the assets to one jurisdiction while leaving the liabilities in the one filing for bankruptcy.  If done obviously this is usually pretty close to fraud, but it could be very blurred and result in potential liabilities in the surviving part of the company that take years to resolve.

 

I have no idea whether this might be relevant to Revell and don't intend to imply any wrongdoing on the part of anyone associated with this company.

Well Revell USA production is all done in China, and that's where their moulds are. There could be endless wrangling over who owns them if the Chinese companies involved are also Hobbico creditors.

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1 hour ago, VMA131Marine said:

Well Revell USA production is all done in China, and that's where their moulds are. There could be endless wrangling over who owns them if the Chinese companies involved are also Hobbico creditors.

Let's hope that doesn't happen then, as there are some gems amongst them :hmmm:

 

In the end, we're just going to have to see how it plays out, as there's nuffink we can do other than watch with concern.  I hope there's been no skulduggery there, but you never know in business, as greed is rampant. :unsure:

 

Anyone got a spare few £million handy so we could make a group purchase?  I'm good for the first £20 :shrug:

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23 minutes ago, Mike said:

................Anyone got a spare few £million handy so we could make a group purchase?  I'm good for the first £20 :shrug:

Well, that's £50 between us, I'll be the mopper uppera, BUT your tea boy! :whistle:

 

Paul

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RoG has been on a downward spiral compared to their glory days in the 2000s. New 1/72 tools are non-existent now and there's been a couple of stinkers in the near past (the panel lines on that Gripen). 1/48 modellers have been better served, though. Quality control is probably my biggest complaint: so much flash, atrocious canopies, and just a general wear in the molds that you don't see in others that may be twice as old. I recently got my hands on the original F-16C and the canopy was perfectly smooth, those in the newest boxings are terrible.

 

But beyond this, I think Revell has a huge marketing problem, and I think their marketers have little or no knowledge of military aviation and are just suits looking to sell stuff. Revell has had so many missed opportunities in terms of variants that they inexplicably never produced, their fetish for special display schemes, etc. Most of us here would do much better jobs at suggesting better projects than they do.

 

It would be a shame if they had major fallout from the Hobbyco bankrupcy, for all its faults Revell is a modelling institution, they are still capable of phenomenal kits (when they want to) and will hopefully see better days. :(

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4 minutes ago, Phantome said:

RoG has been on a downward spiral compared to their glory days in the 2000s. New 1/72 tools are non-existent now and there's been a couple of stinkers in the near past (the panel lines on that Gripen). 1/48 modellers have been better served, though. Quality control is probably my biggest complaint: so much flash, atrocious canopies, and just a general wear in the molds that you don't see in others that may be twice as old. I recently got my hands on the original F-16C and the canopy was perfectly smooth, those in the newest boxings are terrible.

 

But beyond this, I think Revell has a huge marketing problem, and I think their marketers have little or no knowledge of military aviation and are just suits looking to sell stuff. Revell has had so many missed opportunities in terms of variants that they inexplicably never produced, their fetish for special display schemes, etc. Most of us here would do much better jobs at suggesting better projects than they do.

 

It would be a shame if they had major fallout from the Hobbyco bankrupcy, for all its faults Revell is a modelling institution, they are still capable of phenomenal kits (when they want to) and will hopefully see better days. :(

 

A marketing problem ? Considering that RoG is by far the largest plastic modelling company in Europe and that they products fill the shelves of toy shop and other supermarket chains in Germany and several other European countries, I'd say that in terms of marketing they are doing pretty well. The special schemes are constantly produced because they sell well to their main market, casual modellers. As for the variants, what variant would have made a difference in their sales ? Their most succesful products are easy to identify, just look at those that have been in constant production, F-16 Tornado, Typhoon and F-4F. One is simply the best known current fighter in the world and serves in some of Germany's neighbouring countries, the other three are or have been until recently in service with the Luftwaffe. Which other variant of these did they have to make ?

That they have a quality control problem and even more important a problem with the life of their moulds is another story and is undeniable but this occurred well before Hobbico's takeover.

As for their 1/72 moiulds, they never really produced that many new tools even back in the days, Revell's catalogue has always been a mix of new tools, reissues and reboxes from almost every other company in the world. Nothing has really changed from this point of view

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On 1/11/2018 at 3:42 PM, Eric Mc said:
Not good. Hopefully the model manufacturing side of the business can be sold if necessary and can keep going.

To be fair, that often seems to be the case.

Don't forget that in the US, Chapter 11 is not bankruptcy itself (or liquidation as we say in the UK). It's a court procedure that stops the creditors of the business from placing the business into bankruptcy/liquidation. It's usually referred to as Chapter 11 Bankruptcy Protection. Many businesses emerge in one piece from Chapter 11.


 

 

Liquidation's Chapter 7 isn't it?

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Although many of us regard Revell DE products as popular, it probably isn't such a big deal for any prospective U.S. buyer of Hobbico's assets.  In fact, with the current 'America only' trend, that element could even put buyers off.

 

Mike

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21 minutes ago, John Laidlaw said:

Yup.

And a Chapter 11 can be converted to a Chapter 7. The Hobbico statement was fairly clear about the business needing to restructure its debt AND recapitalise to allow for new product development by finding a buyer. If a buyer isn't found then a liquidation sounds like a near certainty. 

 

I did some more digging on the web and found that the Hobbico ESOP at last valuation in 2016 Was worth $70 million with around 700 vested subscribers for an average value per subscriber of $100,000. At the beginning of 2017, Hobbico stopped paying out from the ESOP to people who had left the company (they are required by law to pay out the value of a former employee's share no more than 60 months after leaving the company). Employees waiting for their payments not only did not get their money, but also got statements showing the value of their ESOP shares had dropped by 80%. So there are some employee's who are currently out over $100,000; that's quite a hit to a retirement plan. This is why the company is currently under investigation. The ESOP issue alone could sink the company if it is found to have violated the law.

31 minutes ago, bootneck said:

Although many of us regard Revell DE products as popular, it probably isn't such a big deal for any prospective U.S. buyer of Hobbico's assets.  In fact, with the current 'America only' trend, that element could even put buyers off.

 

Mike

The America Only crowd are a distinct minority.

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9 hours ago, Giorgio N said:

 

A marketing problem ? Considering that RoG is by far the largest plastic modelling company in Europe and that they products fill the shelves of toy shop and other supermarket chains in Germany and several other European countries, I'd say that in terms of marketing they are doing pretty well. The special schemes are constantly produced because they sell well to their main market, casual modellers. As for the variants, what variant would have made a difference in their sales ? Their most succesful products are easy to identify, just look at those that have been in constant production, F-16 Tornado, Typhoon and F-4F. One is simply the best known current fighter in the world and serves in some of Germany's neighbouring countries, the other three are or have been until recently in service with the Luftwaffe. Which other variant of these did they have to make ?

 

Let's see... in 72 scale:

 

for a bare minimum effort they could have produced F-4E and F-4G versions of their F kit. That's a huge number of possibilities.

 

Never followed up their Fw 190A-8 with any other A variants. Again, minimal effort needed for this.

 

Could have done a Hurricane Mk. I from their Mk. IIs.

 

No combat versions of their Hawk, just the Red Arrows version.

 

Never released a Tornado GR.4 either. Was just a matter of a few extra pieces.

 

48 scale:

 

No Rafale C after their M, again minimal changes needed

 

No F-15C either from their Strike Eagle

 

etc etc etc I'm sure there's more but I'm not that familiar with their 1/48 repertoire

 

It seems to me if I was in marketing and I knew a bit or two about aviation, this would be obvious: a whole new kit you can sell with less than 5% of the effort of a new mold! So to me, it's not a matter of Revell being the biggest European model company, it's how bigger/better it could be. And yes, all companies have had a number of missed opportunities, but not in the numbers that Revell has had.

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I'm not an expert on US insolvency law. I work as an accountant in the UK so am reasonably aware of the various rules and regulations that cover such matters here. The principles and redresses available to companies in trouble are broadly similar between the US and the UK but, of course, the detailed legislation and the legal terms used are significantly different.

 

Over here we have terms such as "bankruptcy (usually when talking about individuals), receivership, administration, liquidation, striking off etc. 

 

My aware ness of Chapter 11 Bankruptcy protection is actually more to do with my interest in the civil airline scene. There is hardly a US airline that, at some time in its past, been in and out of Chapter 11. Sometimes the airlines survive and continue to trade. Other times Chapter 11 marks the beginning of the end.

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The crux of this could be where are the tooling for both Revell DE and RVM, if they are located in China, and Hobbico owe the Chinese factories a bunch or Wonga, things can get sticky.  This could mean a one way trip to the scrap yard.

 

We have lost a number of companies from the Diecast Aviation world that went west and the tooling has been scrapped due to none payment of debts in China.

 

It all comes down to who owns the tooling, Revell DE can be stand alone all they want but if Hobbico own them and the tooling, you are not much of a model company with your tools in the Scrap yard.

Edited by TIGER HOBBIESLIMITED

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.

 

The key thing SEEMS to be a bad imbalance between assets and debts.  The Chapter 11 allows time (and some incentive) for restructuring debts, but a lot depends on who owns the debt and what REALISTIC plan the company has for turning things around. 

 

IF they are operationally profitable and just not earning enough to service their huge debts, then there is something to discuss.   IF they aren't even operationally profitable then probably a break-up / sell-off makes sense.

 

I wish them luck

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Let put this into perspective, when dear Hornby had their troubles in early 2016, there value dropped from about £50 Million to £9 Million, they owed the banks £10 Million but still had enough assets and value to stave off going under, after agreeing with their banks and debts.   Hobbico if news is correct from the USA said it has an estimated 200 to 999 creditors, $10 to $50 million in assets, and $100 to $500 million in liabilities. this is a whole different ball game, too far deep in the SH*T to come out smelling of roses.

 

This makes Hornby's problems look like the Singing Nun, not sure who the singing nun is.

 

 

 

 

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8 hours ago, TIGER HOBBIESLIMITED said:

The crux of this could be where are the tooling for both Revell DE and RVM, if they are located in China, and Hobbico owe the Chinese factories a bunch or Wonga, things can get sticky.  This could mean a one way trip to the scrap yard.

 

We have lost a number of companies from the Diecast Aviation world that went west and the tooling has been scrapped due to none payment of debts in China.

 

It all comes down to who owns the tooling, Revell DE can be stand alone all they want but if Hobbico own them and the tooling, you are not much of a model company with your tools in the Scrap yard.

Revell DE produced tools are all molded in Poland so it seems logical to conclude that's where the molds are. The Revell USA and ex-Monogram molds are the ones in China.

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Having read the available articles and what's public on the BK filing, I am more or less convinced that Hobbico is doing this, at least in part, to ditch its obligations to its ESOP holders. Hobbico is an employee-owned company so all its employees get tax advantaged contributions of stock in the company. The catch is that when an employee leaves or is laid off (and Hobbico has laid off a lot of people over the last couple of years) they are entitled to a payout of the value of their ESOP shares 60 months after their termination date. Hobbico failed to make scheduled payouts from the ESOP at the end of 2016 and the share value plummeted by 80%. I did some digging and discovered that in 2015 the total value of shares in the ESOP was $70 million with 700 holders of shares for an average value per person of $100,000. 
In the bankruptcy, claims of the ESOP holders are subordinate to all other creditors. Assuming Hobbico finds a buyer, the ESOP shares remain with the bankrupt company and the shareholders get whatever is left after all other creditors have been paid. Hobbico just received permission from the bankruptcy court to access $70 million in debtor-in-possession financincing to keep the restructuring going and find a buyer. This financing is senior to all other debt the company has and, presumably coincidentally, is about the same as the ESOP valuation in 2015. The sale of the company will also free it from the ongoing investigation by the Federal government into mismanagement of the ESOP. 
So my guess is that Hobbico is sold and survives in some form, although maybe it won't remain in Champaign, IL, but spare a thought for the 700 or so current and former employees who are going to see a good chunk of their retirement savings wiped out by this move. Note that, like stocks in 401k's, ESOPs are not covered by US Federal government pension guarantees.
Edited by VMA131Marine

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2 hours ago, VMA131Marine said:
Having read the available articles and what's public on the BK filing, I am more or less convinced that Hobbico is doing this, at least in part, to ditch its obligations to its ESOP holders. Hobbico is an employee-owned company so all its employees get tax advantaged contributions of stock in the company.

You may well be right, but what I don't understand is why the owners of the company (the employees) would choose a course of action which will wipe them out financially and allow someone else to profit from the ashes. Or is the ESOP just a minority of the total voting share capital? Are ESOP shares non-voting?

 

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22 minutes ago, Chimpion said:

You may well be right, but what I don't understand is why the owners of the company (the employees) would choose a course of action which will wipe them out financially and allow someone else to profit from the ashes. Or is the ESOP just a minority of the total voting share capital? Are ESOP shares non-voting?

 

The company is employee-owned not employee-run. Rank-and-file employees don't have a say in how the company is operated and they don't get to vote on company leadership. I think this is a flaw in the system for private companies.

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Listening to the Singing Nun now. I remember her from when I was child. I read that she topped herself many years later.

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Further into perspective to show how bad this is Carillion who employ 43,000 world wide are in trouble for about $2 Billion with massive contracts worldwide.

 

A Hobby company employs 700 or so and a warehouse cat,  before lay offs started have some how managed to run up liabilities of may be $500 Million or a qtr of the losses of massive 43,000 soul company, that takes skill.

 

No mater whats happened or what ever excuses will come out, this boarders on the madness.

 

A lot of workers at Hobbico who have just done their jobs will be the ones to suffer. 

Edited by TIGER HOBBIESLIMITED

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On 13/1/2018 at 4:36 AM, Phantome said:

 

Let's see... in 72 scale:

 

for a bare minimum effort they could have produced F-4E and F-4G versions of their F kit. That's a huge number of possibilities.

 

Never followed up their Fw 190A-8 with any other A variants. Again, minimal effort needed for this.

 

Could have done a Hurricane Mk. I from their Mk. IIs.

 

No combat versions of their Hawk, just the Red Arrows version.

 

Never released a Tornado GR.4 either. Was just a matter of a few extra pieces.

 

48 scale:

 

No Rafale C after their M, again minimal changes needed

 

No F-15C either from their Strike Eagle

 

etc etc etc I'm sure there's more but I'm not that familiar with their 1/48 repertoire

 

It seems to me if I was in marketing and I knew a bit or two about aviation, this would be obvious: a whole new kit you can sell with less than 5% of the effort of a new mold! So to me, it's not a matter of Revell being the biggest European model company, it's how bigger/better it could be. And yes, all companies have had a number of missed opportunities, but not in the numbers that Revell has had.

 

For a starter some of the variants you mention require way more than 5% of the effort of a new kit. The Hurricane and the Fw.190 both require a brand new fuselage, meaning almost 50% of the effort needed for a new kit. And here's the problem: will the 50% investment bring a 50% return? Or not ? The largest part of Revell's customer base is not made by enthusiasts who know everything about every possible variant of an aircraft, most of them want a Hurricane because it's a well known aircraft. With only a few bits Revell gave more than one variant over the years to those who want another Hurricane after the first one but didn't have to mould a totally new fuselage. Had they issued a Hurri Mk.I, would they have had their investment back ? Most probably not. Same for the Fw.190, how many casual modellers would leave the Revell kit on the shelves because they didn't do an A5 ? I doubt that many.

The F-4E and the Gr.4 sure would have needed less parts, but again how many would they have sold ? Revell issued a Tornado GR.1 and the specific parts had been designed together with the basic kit, when the GR.4 was just enterring service. They offered a then current British Tornado, how well did it sell ? Maybe not as much as other boxes considering that the GR.1 was not as available as the many German anniversary schemes. Would you invest in new parts when you're not guaranteed the sales?

Same for the F-4E, Revell never isseud this variant but it's likely that they considered that such variant would have not added enough sales to be worth the trouble. After all Revell did an F-104C together with their G, with the result that the C was only on sale for a short time. The same Revell though did a 1/32 F-4E (and a G), most likely because the US side of the operations believed that this scale would been more welcome in that market.

As for the Hawk, that mould is brand new, we can't tell yet if a "combat" version will be made or not. In any case, Red Arrows boxes of the Hawk way outsell all other ones, it makes perfect sense to offer this variant.

Moving to 1/48, the Rafale C has been announced for 2018 so it's coming. The mould has actually existed for a long time, and ACE (who made the mould) have had the C in catalogue for a while.

The F-15E was the first real 1/48 F-15E... making a C from this mould would be as wrong as all the many F-15E made starting from simple F-15D boxes

And so on....

The same criticism could be pointed toward Airfix, as they also issued kits that would need major modifications to produce different variants (Lightning) or never issued new variants of existing kits (fabric wing Hurricane). The problem is that we don't actually know the results they had for the various kits and the kind of sales increase they could get from adding new parts. As enthusiasts we believe that certain choices would be no-brainers as  we would like a certain variant (just see the discussion on the new Airfix Hunter) but without knowing sales numbers, where sales occur and who the typical buyers are, it's impossible to claim that the variant we want would make financial sense.

 

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On 1/12/2018 at 8:20 PM, Giorgio N said:

 

A marketing problem ? Considering that RoG is by far the largest plastic modelling company in Europe and that they products fill the shelves of toy shop and other supermarket chains in Germany and several other European countries, I'd say that in terms of marketing they are doing pretty well. The special schemes are constantly produced because they sell well to their main market, casual modellers. As for the variants, what variant would have made a difference in their sales ? Their most succesful products are easy to identify, just look at those that have been in constant production, F-16 Tornado, Typhoon and F-4F. One is simply the best known current fighter in the world and serves in some of Germany's neighbouring countries, the other three are or have been until recently in service with the Luftwaffe. Which other variant of these did they have to make ?

That they have a quality control problem and even more important a problem with the life of their moulds is another story and is undeniable but this occurred well before Hobbico's takeover.

As for their 1/72 moiulds, they never really produced that many new tools even back in the days, Revell's catalogue has always been a mix of new tools, reissues and reboxes from almost every other company in the world. Nothing has really changed from this point of view

 

AS far as marketing is concerned, I would have to agree with Giorgio N. I cannot think of another mainstream kit manufacturer (other than perhaps Airfix) that has ensured its kits are available in some of the strangest places imaginable (both geographically and from a marketplace perspective). Here in Estonia, for example, which appears to be a bit of a modelling desert, the only kits that are easily available are those from Revell of Germany; I've seen them in newsagents, supermarkets and garden centres as well as most toy stores. I feared the worst when Hobbico took over, given the USA's extensive investment in new mould kits during the last 5-10 years (almost zero !). As others have said, RoG had one of the most ambitious release programmes outside of the Far East and across a wide variety of genres. In recent years we have seen an large scale downturn, thankfully plugged by the 'new' generation of Chinese manufacturers (Great Wall Hobby, Kinetic, Kittyhawk et al) and Airfix. The Project Management Team at RoG have put a brave face on it but I suspect they have been frustrated with the lack of investment by the US-based parent company who have little to no understanding or appreciation of the European market (or indeed their own, given the popularity of RoG products across the pond).

All being well, a European-orientated rescue package can be organised for RoG, which will provide the company with sustained if modest prospects and a degree of stability. Time will tell.         

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On 1/13/2018 at 3:36 AM, Phantome said:

 

Let's see... in 72 scale:

 

for a bare minimum effort they could have produced F-4E and F-4G versions of their F kit. That's a huge number of possibilities.

 

Never followed up their Fw 190A-8 with any other A variants. Again, minimal effort needed for this.

 

Could have done a Hurricane Mk. I from their Mk. IIs.

 

No combat versions of their Hawk, just the Red Arrows version.

 

Never released a Tornado GR.4 either. Was just a matter of a few extra pieces.

 

48 scale:

 

No Rafale C after their M, again minimal changes needed

 

No F-15C either from their Strike Eagle

 

etc etc etc I'm sure there's more but I'm not that familiar with their 1/48 repertoire

 

It seems to me if I was in marketing and I knew a bit or two about aviation, this would be obvious: a whole new kit you can sell with less than 5% of the effort of a new mold! So to me, it's not a matter of Revell being the biggest European model company, it's how bigger/better it could be. And yes, all companies have had a number of missed opportunities, but not in the numbers that Revell has had.

Revell have always made limited versions of their kits, if you make too many versions from the same tooling you effectively go into competition with yourself ,a rafale c is being issued this year 

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37 minutes ago, gavingav said:

Revell have always made limited versions of their kits, if you make too many versions from the same tooling you effectively go into competition with yourself ,a rafale c is being issued this year 

Exactly. If you already have a version A of a plane, to work out if it's worth making a version B you need to know how many will buy both, or will buy the B but wouldn't buy the A. People who would rather have the B, but would buy the A anyway and don't want two types of this plane don't help the business case for type B at all.

 

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1 hour ago, Chimpion said:

Exactly. If you already have a version A of a plane, to work out if it's worth making a version B you need to know how many will buy both, or will buy the B but wouldn't buy the A. People who would rather have the B, but would buy the A anyway and don't want two types of this plane don't help the business case for type B at all.

 

 

From the other hand, many (smaller?) companies do otherwise to increase sales. I guess it works roughly like that: LHS or distributors would buy 15 kits, but with 4 different boxes they may have to buy each ones, so for example 4 x 5 = 20 kits total. I guess more niche producers aims for modellers, who want specific variants/schemes, when mainstream producers, supplying toy shops etc. aims for people who want just a Spitfire, Bf-109 and on.

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