Jump to content
House Price Crash Forum

Lockdown: 'I've borrowed £4m just to remain closed' + another £1M


He has borrowed £5M is that a good business decision, or good money after bad  

11 members have voted

  1. 1. He has borrowed £5M is that a good business decision, or good money after bad

    • Yes
      3
    • No
      8


Recommended Posts

https://www.bbc.co.uk/news/business-55529130

Just when the hospitality sector thought things couldn't get any worse, it has been hit by another lockdown.

Last year's rolling closures forced Martin Wolstencroft to borrow £4m just to ensure the survival of Arc Inspirations, a bar chain with 17 venues across the north of England that he has spent the last two decades building into a successful business.

And the latest lockdown has forced Mr Wolstencroft to ask his bank to lend him another £1m.

He reckons the debt he has taken on so far will take the business six years to pay back, which leaves him facing some difficult decisions.

28435074-4193-45b4-8908-f12773216cc1.jpg

Link to post
Share on other sites
5 minutes ago, Si1 said:

I'm guessing it's a limited company so not really personal risk?

He has spent in his opinion two decades to build it, I do think the new generation might not go to clubs as much as we did not, due to lockdown they might have unlearned that

Link to post
Share on other sites
3 minutes ago, shlomo said:

He has spent in his opinion two decades to build it, I do think the new generation might not go to clubs as much as we did not, due to lockdown they might have unlearned that

Yeah he might have done so I have some sympathy. That's lots of emotional and physical investment. But that's business.

Link to post
Share on other sites

Looking at the filing history it isn't a particularly profitable business - loss making in a statutory sense, and on adjusted measures it just seems fairly marginal.

What jumps out at me is the directors pay, £943k spent, too many directors for this size of company, four of them share two surnames.

Seems a company run for the benefit of its directors, if it shuts the gravy train for them is over.

Link to post
Share on other sites
1 hour ago, shlomo said:

He has spent in his opinion two decades to build it, I do think the new generation might not go to clubs as much as we did not, due to lockdown they might have unlearned that

not a club goer anymore, but certainly won't be going to the pub as often...if they ever open. Think people have just learnt other ways to meet up and spend time.

Link to post
Share on other sites
1 hour ago, simon2 said:

Looking at the filing history it isn't a particularly profitable business - loss making in a statutory sense, and on adjusted measures it just seems fairly marginal.

What jumps out at me is the directors pay, £943k spent, too many directors for this size of company, four of them share two surnames.

Seems a company run for the benefit of its directors, if it shuts the gravy train for them is over.

I think you are kind of missing the point. Companies are run to the benefits of their owners whether they be directors or not, although in small business they are often the same people.

As an owner you can choose either to take money out as dividends through profit making or take it out via paying yourself a large salary. Which you would prefer is dependent on quite a few things and is usually set up to minimise tax. But a business that pays large director (owner) salaries and produces small profits is no less viable than one that pays small director salaries and produces large profits.

 

Edited by Gigantic Purple Slug
Link to post
Share on other sites
2 hours ago, shlomo said:

Last year's rolling closures forced Martin Wolstencroft to borrow £4m just to ensure the survival of Arc Inspirations, a bar chain with 17 venues across the north of England that he has spent the last two decades building into a successful business.

The NEW economy sadly...

 

Link to post
Share on other sites
1 hour ago, Gigantic Purple Slug said:

I think you are kind of missing the point. Companies are run to the benefits of their owners whether they be directors or not, although in small business they are often the same people.

As an owner you can choose either to take money out as dividends through profit making or take it out via paying yourself a large salary. Which you would prefer is dependent on quite a few things and is usually set up to minimise tax. But a business that pays large director (owner) salaries and produces small profits is no less viable than one that pays small director salaries and produces large profits.

 

Don't really have an issue with people paying themselves lots. 

The article tone seems to be wanting to garner sympathy - was he really 'forced' to take on £4m of debt? I don't think so. That's their choice.

It boils down to property. The bar business is not particularly viable, in that it has more liabilities than assets. However, the bars pay rent to a related property holding company that is very viable. If the bars closed today that would be a disaster for them - long voids and reduced rents when they do re-let.

So his borrowing of £4m is not really to remain closed, but to ensure one company can keep on making rent payments to another company. Not really anything about jobs as most of them will be non-contract students, or even providing a service as they seem heavily concentrated in one city (Leeds).

Link to post
Share on other sites

Anyone know how Birmingham is faring? When I lived there literally no end of expensively kitted out bars, restaurants, etc. all over the place  (Blair/Brown boom). I can imagine they have been utterly devastated by the lockdowns.

 

Link to post
Share on other sites
24 minutes ago, simon2 said:

Don't really have an issue with people paying themselves lots. 

The article tone seems to be wanting to garner sympathy - was he really 'forced' to take on £4m of debt? I don't think so. That's their choice.

It boils down to property. The bar business is not particularly viable, in that it has more liabilities than assets. However, the bars pay rent to a related property holding company that is very viable. If the bars closed today that would be a disaster for them - long voids and reduced rents when they do re-let.

So his borrowing of £4m is not really to remain closed, but to ensure one company can keep on making rent payments to another company. Not really anything about jobs as most of them will be non-contract students, or even providing a service as they seem heavily concentrated in one city (Leeds).

Exactly. This is a property company selling drinks. The debt, it to mostly service the santander 400k a quarter debt. Looks like they have loaned them money to pay the interest on the existing loans. 

Link to post
Share on other sites
48 minutes ago, Odysseus said:

I’m struggling to understand who would loan him £4m in the first place?

So I have no idea what assets the business has, however, if they were able to show they have assets to put against the loan then the bank would be willing to back them on the basis that liquidation would recoup the debt. I do also wonder if this is partly debt restructuring.  It’s still almost 250k per venue which seems a bit crazy.  But then again I’m not a spiv captain of industry so what do I know.  

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    No registered users viewing this page.



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.