What A Time. What A World This Was. What A Loss.
October 25, 2019 9:56 AM   Subscribe

How Manhattan's City Bakery Crumbled, under weight of debts. Rachel Holliday Smith and Josefa Velasquez of The City delve into the usury and vulture capitalism that doomed one of New York City's iconic small businesses.
posted by Etrigan (7 comments total) 10 users marked this as a favorite
 
That’s because Rubin had already signed a “confession of judgment” in exchange for a financial lifeline, known as a merchant cash advance — a high-cost, high-risk type of transaction that is now the subject of multiple New York State investigations following a Bloomberg News expose.

Ugh. I understand that collecting debts can be fraught with issues, but the borrower is generally in a position of powerlessness to begin with in this transaction, so allowing a contract where you give away any right to dispute the debt is signing your own business' death warrant. Very sad to see.
posted by xingcat at 11:04 AM on October 25, 2019


What does KCG gain by the bakery closing? Wouldn't it have been prudent to negotiate less draconian terms?
posted by rdr at 11:35 AM on October 25, 2019


confessions of judgement previously on MeFi
posted by lalochezia at 12:11 PM on October 25, 2019


Certainly, there are predatory elements in this story, but it also seems to be an issue of ill-advised and too rapid expansion, combined with being busted for wage theft.
posted by TheWhiteSkull at 12:22 PM on October 25, 2019 [10 favorites]


What does KCG gain by the bakery closing? Wouldn't it have been prudent to negotiate less draconian terms?

With these kinda loans, you're resigned to the fact the person borrowing is likely to never pay it back. Because if you were a solid borrower, you'd be getting a regular loan with regular terms.

That's the reason for the "confessions of judgement" part. You are going into it pretty much expecting the other party to collapse, you get all the red tape related to the potential liquidation sorted out ahead of time.
posted by sideshow at 2:41 PM on October 25, 2019


What does KCG gain by the bakery closing? Wouldn't it have been prudent to negotiate less draconian terms?

I think you can assume that KCG is like a hard money lender in that the terms of the loan work out regardless of whether the enterprise goes under. They are lending money to a sinking ship not investing in a turn around. Perhaps they are perfectly happy taking either a lot of interest or getting the wreckage of the ship for the price of money they let out. It is unclear from the article whether or not this was predatory I don't think the fact that they have a confession of judgement necessarily means that it is. The Bloomberg story is about legal crime and trying to kick the feet out from under somebody that you have given the hard sell to take your money. This story seems to be about a business that while popular was in a dire way and borrowed money the only place they could. The line about "...if a normal bank loan had been available..." seems to be saying it wasn't the business fault. They might as well have said if an angel investor(s) had stepped forward.....
posted by Pembquist at 2:53 PM on October 25, 2019


but it also seems to be an issue of ill-advised and too rapid expansion

They really are expanding rapidly here in Japan, with nine branches and a tenth scheduled for early next year. The news articles I've read made it sound like they were actual branches rather than just a name-licensing deal, but on the other hand the branches here are still open, so maybe they're not owned directly.
posted by Umami Dearest at 9:10 PM on October 26, 2019


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