Neighbourhood losses mounted after Manchester closure

East Coast concepts, the Neighbourhood and Victor’s operator recently acquired in a pre-pack administration, was already going through a challenging year even before the coronavirus pandemic struck, posting a loss of £1.7m in the 12 months to 29 February 2020.

The business, which was acquired by an investment group led by Carin Group director Naveen Handa, suffered after losing its license at its most popular site, Manchester’s Spinningfields, an administrator’s report reveals.

The group sought additional support from backer NorthEdge in 2019, with a view to achieving a turnaround.

Plans were put it in place to correct operational issues, right size the management team, and refocus the business on meeting guest expectations across the portfolio.

But before the measures could have a material impact, the pandemic hit.

East Coast accessed £786,000 in furlough support, and £30,000 in business grants

However, it was failed to secure support from the Coronavirus Business Interruption Loan Scheme (CBILS), due to its balance sheet position.

Rateable values at all sites other than Hale and head office were more than £51k, so it was ineligible for grant support.

The business had a £1.8m black hole in its finances, which was reduced to £1.3m by mitigating actions including deferment of landlord rents.

Deloitte was instructed to carry out high level review on behalf of Northedge, with several options explored, including debt finance.

Lenders were approached however there was “very limited appetite received”, and it was concluded that additional debt financing was not in interests of company creditors.

An accelerated sales process was considered the best option of meeting the funding need, and FRP Advisory was engaged

The company had a net liability position of £5.6m in its March balance sheet.

Northedge had a fixed and floating charge over the company up to £2m.

During the sales process, six offers were made, with a bid accepted for £600,000, later revised down to £520,000, with all jobs preserved, thereby removing any preferential creditors.

The transaction to Minhoco was completed on 2 Sep.

The management team of John Hammond, Guy Hitchen and Adam Bowers were offered roles, with some minority shareholders retained.

The purchaser was described as The Station Hotel (Newcastle) Limited, a trading entity of the Cairn Group, led by Aran and Arvan Handa.