New York-inspired restaurant group Dirty Bones has sold half of its six-strong estate in a pre-pack administration deal.
The group’s sites in London’s Soho and Carnaby, as well as its restaurant in Oxford, have been acquired by a new company called DB Opco.
The buyer is led by Jamie ‘Cokey’ Sulkin, who co-founded Dirty Bones in 2014 alongside partner Dipak Panchal, who separately run Arcade Food Hall.
DB Opco bought the Dirty Bones brand and the three sites for a total consideration of £612,100.
According to Companies House, Hard Yards Global an early investor in Dirty Bones, holds a 75% stake in the new business.
Brian Baker and Ian Robert of Moore Kingston Smith & Partners were appointed joint administrators on 12 May.
Founded in in Kensington by Panchal as a speakeasy bar with New York City-inspired comfort food, Sulkin joined the business in 2015 and became CEO.
The pair had extensive experience in hospitality, having operated nightclubs and pubs, and felt there was a gap in the market for venues serving cocktails, dinner and after-hours entertainment.
They sold equity to fund second site in Carnaby, and a gastropub, The Black Dog opened in 2019.
Further equity was raised to open a third site in Shoreditch, with a commitment made to open sites in Soho and Oxford, with a private loan of £2m earmarked to pay for the acquisition and capex of these sites.
This deal did not complete however, and a bridging loan of £600k had to be arranged at a high interest premium, and more equity was sold.
The loan remained in the business for longer than hoped as Brexit impacted the eating out market, and the team struggled to refinance the loan.
It wasn’t until March 2020 that a loan of £1.6m was obtained from the QFCH (Qualifying Floating Chargeholder) to refinance the business debts.
By this time there were seven trading locations.
The business opened Dirty Vegan at Westfield in Dec 2019, just before the onset of the Covid pandemic.
At this point, there were 280 employees and the business was trading at £10.4m turnover with EBITDA of £0.75m.
Completion of the loan with QFCH coincided with the start of lockdown, with all sites having to close.
The team attempted to keep the brand alive by starting a meal-kit business, selling up to £25k a week via the post, while keeping all non-essential staff on furlough.
Moore Kingston Smith & Partners were previously introduced to the company in March 2021, and advised in relation to potentially placing the companies into administration.
However, the company obtained additional investment and formal insolvency was not required a this time.
During the pandemic, the impacts of restrictions meant the business built up significant debt with creditors, including HMRC.
Most landlords were supportive, and the business was stabilised by agreeing delayed interest payments on loans, and lengthened invoice terms with creditors.
By March 2022, consistent trading resumed, and revenues were close to pre-pandemic, but the business struggled to make sufficient profits and amortise its debts, blaming global issues such as energy costs, inflation and interest rate rises.
HMRC became less supportive, and on expiry of a Time-To-Pay arrangement, sought payment of £800k in respect of the companies VAT/PAYE debt, which the business could not afford to make
The team consulted advisors, and a CVA process began to be implemented - but there was too much contagion between the entities to make a viable proposal to creditors.
The business also made several redundancies and further cut costs. It removed the reservations department, replacing the team with a digital system.
Having reviewed its options with advisors, a decision was made to seek a sale and place the business into administration.
It was sold for a total consideration of £612,100, with Oxford, Carnaby and Soho passing over to the buyer.
Shoreditch closed in April, and Westfield and Kensington closed several months prior to administration.
