Hotel and Convenience store business – Case Study

• Sector - Hospitality: Accommodation and Retail
• Turnover - £17.4 million
• Number of employees – 65

Situation

The company owned and operated a popular hotel, leisure club and golf course near Bath which had been impacted by the Covid-19 pandemic.  

As part of its wider plans to restructure and turnaround performance, with the support of the Mazars Corporate Finance team, the company had successfully sold its food wholesale business around 12 months earlier and was in the process of selling various convenience stores it also owned and operated.

Historic creditors from the wholesale business were becoming increasingly aged and, with the hotel not being able to operate at full capacity, the business was running out of cash.  Further secured borrowing was not possible, and whilst government support though the CJRS and grants were helping, 12-months of varied restrictions had made things increasingly uncertain and difficult to manage in terms of the day to day operations.  

The company owned the freehold for the hotel and golf course and it was estimated by property agents that, on a going concern basis, there was potential for equity available over and above the charges held by two secured creditors.  Value would, however, be significantly impaired if the hotel ceased trading.

Approach

Following our appointment as administrators, we immediately committed to continue trading the business, overdraft facilities were secured to meet cashflow requirements and major suppliers were contacted to ensure relationships were maintained and the business could continue to operate.

Agents were engaged to finalise the sale of the remaining two convenience stores, and identify a buyer for the hotel property & business.

Hotel management was highly competent and continued to operate that part of the business under the administrators’ supervision, without the need for a full time agent to be put in place. Ultimately the trading period in the administration lasted some 10 months and was profitable.

Overall, our proactive approach taken during the administration trading period preserved the value in the business whilst the sale process could progress and contracts with the buyer were negotiated and completed.

Impact 

As a result of trading the business:

• The hotel remains open and operating under new ownership.
• All employees were retained and transferred to third parties with the exception of 3 redundancies (which were already planned due to the disposal of the retail part of the business).
• Customer deposits/ pre-payments were maintained and honoured.
• Hotel reputation and goodwill maintained.
• Hotel buyer is highly satisfied with our conduct and approach to the sale process.

Realisations as a consequence of our work has and will result in significant distributions being able to be made to all classes of creditors, including an expected distribution to the shareholders:

• £1.35m returned to the senior and junior secured creditors.
• Return to preferential creditors’ of 100p in the £.
• Return to unsecured creditors’ of 100p in the £, plus statutory interest.
• Solvent outcome and forecast distribution to the shareholders.