MCH and Corona: who covers the damage?

The number of exhibition cancellations at the MCH Group has been increasing in recent days. Are insurance companies liable for the damage or is this simply a case of force majeure? Corona is now likely to tear a hole in the MCH Group's current accounts.

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Bernd Stadlwieser, CEO MCH Group, says that the stability of the MCH Group is not at risk.

 

On Friday, 6 March, the MCH Group published a press release with the title "Coronavirus: stability of the MCH Group is not at risk". But it is planning cost-cutting measures to reduce personnel costs. This follows the cancellation of Art Basel Hong Kong in 2020 because of the coronavirus and the fact that numerous major exhibitions in Switzerland, such as Baselworld, Giardina and SmartCity, have fallen victim to the Federal Council's ban on events.

 

Who pays for the damage?

Who will now pay for the damage incurred and what exactly does it consist of? As early as the beginning of February 2020, the MCH Group promised the exhibitors at Art Basel Hong Kong that it would refund 75 per cent of the stand rents for the exhibition that was not held in March. Exhibitions such as this or Giardina in Zurich were in some cases already under construction. Who will now bear this additional loss for the exhibitors and, if necessary, the stand builders? And can exhibitors even claim damages for lost business?

MCH company spokesman Christian Jecker says in the Basel newspaper On March 5: "We are currently checking with insurance companies to see if the fair cancellations (note: probably not just Art Basel Hong Kong) are covered."

The 2019 and 2020 business years are likely to make a hole in the MCH Group's income statement. How can impending losses now be covered? The stability of the MCH Group was not at risk, MCH CEO Bernd Stadlwieser (pictured above) said in the press release on March 6. MCH company spokesman Christian Jecker told the Basel newspaper on 6 March "It's not that it's a matter of survival for us now." According to the Basler Zeitung, however, the MCH Group's liabilities of 410 million francs exceeded its equity capital by 700 (!) per cent. A debt ratio of 200 per cent would be regarded as "healthy". It takes someone to understand both of these things. Even major shareholder Erhard Lee of the investor group AMG, which had called for an extraordinary general meeting in January 2020, says "I don't think the group is in financial distress." Basel councillor David Wüest-Rudin takes a different view in the Basel newspaper: "The situation is worrying."

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The assets of the MCH Group

The MCH Group has assets with the relatively young and modernised exhibition centres in Basel and Zurich in attractive inner-city locations, respectively, Art Basel, which is estimated at 200 - 300 million Swiss francs, and Live Marketing Solutions, the service companies for the core business of marketing events (=exhibitions and events).

Assets are one thing, but how can the MCH Group's impending and past losses be covered? The corona virus could now speed up the process of selling Live Marketing Solutions with Expomobilia, MCH Global and the American exhibition construction company MC2. This could flush much-needed cash into the coffers and relieve the operating costs of around 500 of the 950 or so employees. Then there are allegedly more and more interested parties in Art Basel. According to the news platform "Switzerland News", however, the MCH Group does not intend to sell its flagship. If the MCH Group wants to keep Art Basel, this would be a further indication that the LMS must now be sold. Again, it is possible that Corona could throw a wrench in the value of this asset, as it has already done with Art Basel Hong Kong, which had to be cancelled in March 2020 because of Corona. The value of a fair can only be measured by whether it actually takes place.

The Corona virus has brought the trade fair business in Switzerland and elsewhere (Germany) to a halt in one fell swoop.

 

An event ban is too short-sighted

Unsurprisingly, the MCH Group's share price is now CHF 18.50 (8 March 2020). On 29 November 2019, it was still at CHF 29.60. As if the MCH Group did not have enough to do with itself following the downward trend in the exhibition business in Switzerland, it is now facing the biggest test in its history thanks to Corona.

But it is probably clear to everyone that the effects of the Corona crisis cannot be dealt with by one group of companies alone. The Swiss Federal Council should now, until March 15, work hard on what it can do for the Swiss event industry. Its further decline must be prevented wherever possible, its economic impact is too great. Where there are no more trade fairs, first the trade of the stand builders, then the other trade fair service providers and finally the trade itself will suffer. Together, this could trigger an unintended wider circle of negative economic effects of which we may not even be aware yet. That is why an event ban alone falls far short.

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