Administrative Receiverships - Case Study

RESCUE AND SALE OF EXCLUSIVE COUNTRY HOUSE HOTEL

Company's Circumstance

The company had raised finance through a secondary lender to acquire an old country residence plus stable block and fund the cost of the refurbishment. The intention was to redevelop the hotel for an exclusive market. The cost of the refurbishment materially exceeded the budget and within 6 months of the hotel opening its doors to the public, cash flow problems were so severe that continued trading was not feasible.

The secondary bank instructed the practice to investigate the company and the hotel's viability. We concluded that the hotel could trade positively with a reduction in staff numbers, additional controls on expenditure and stock control and a targeted marketing plan. The bank was prepared to support the trading in the short term but required repayment of the capital sums advanced. This meant that a sale of the hotel was necessary.

Solution

The bank appointed an Administrative Receiver and steps were taken immediately to rationalise and control expenditure. Specialist agents were appointed to market the hotel as a going concern.

Much of the existing team needed to be replaced and so a ‘hands on approach' was adopted by the Receiver's team. New staff were recruited, controls introduced to ensure that the quality of service was maintained, and as a result of various promotions, the hotel's occupancy was increased.

A sale of the hotel as a going concern was achieved within 6 months of the Receiver's appointment which resulted in the secured lender recovering their lending in full.

 

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