A bit like Christmas, Lord Bilimoria’s largesse comes around once a year. This is the time of year when the vice-president of the CBI, who founded Cobra beer, reveals the size of the dividend he will be paid by the business – money he can then use to reimburse his creditors.
What on earth am I talking about, you ask? Well, to cut a long story short, when the cheerful peer established his beer business in 1989 with university chum Arjun Reddy, he immediately set to with his usual enthusiasm to grow sales as fast as he could.
Sure enough, Cobra beer was soon popping up alongside Kingfisher (sometimes even supplanting it) in curry houses up and down the country. But the problem was that the more he spent on marketing, the faster he grew sales, the more he spent on marketing, the faster………….you get the picture. Then along came the recession. Having borrowed heavily from a hedge fund (not his best idea), the business suffered financial trouble, and underwent a painful restructuring.
The money ran out and a decade after its launch Cobra went bust, leaving 340 creditors out of pocket to the tune of more than £70m. To his credit, Bilimoria quickly signed a rescue deal with Molson Coors, giving the American brewer 50.1% of the newly coined Cobra Beer Partnership and operational control, with its founder holding the balance of 49.9% and remaining chairman.
To his further credit, the Indian-born peer made a cast-iron promise to repay all his creditors from his share of subsequent dividend payments, although some investors who took out insurance were excluded. Every year I ask him about progress on repayments, and every year I get roughly the same statement: “As before, the vast majority of the dividends has been used to settle creditors and over the remaining years of the joint venture, Lord Bilimoria plans to continue to settle remaining creditors from his share of the dividend.”
One creditor I have been in contact with said that, as with his dealings with The Times, Bilimoria “gave me the same stuff he’s given me time and time before - just kicked the can down the road”. Some of what my contact said was a bit rude, so I’ll spare you that, but what gets my man is the Cobra chairman “made a personal pledge to pay back all his suppliers, saying he wanted to do the right thing for the smaller businesses”….then failed to do so. Or at least he has so far failed to do finish the job.
So how much has he repaid so far, you ask? The answer is, we simply don’t know. In theory, it could be a decent chunk of the £70m he owes, as the dividends from Cobra can be reasonable amounts. For example, the dividend paid out by the Cobra Partnership as part of last year’s accounts amounted to £8.6m, of which Bilimoria’s share for his 49.9% of the company is £4.3m. In previous years, his share of the dividends amounted to £2.3m in 2021, £3m in 2020 and £4.2m in 2019.
Trading was badly hit during the pandemic, mainly due to the closure of Indian and Bangladeshi restaurants during lockdown. However, in the year to the end of 2021 the business gradually returned to pre-pandemic performance levels, and the payouts have risen accordingly.
One issue is that the joint venture with Molson Coors was established for ten years, implying that it was due to expire in 2019. However, the agreement was extended in May 2019 and Bilimoria has made the same promises over the repayment of creditors every year since. Indeed, in 2019, having reiterated that he was doing his utmost to honour that pledge, he declared that he would continue do so “for as long as it takes”, from his share of subsequent dividend payments.
As you would expect, the creditors who I’ve spoken to are among those who remain out of pocket. I wouldn’t expect many – if any – of the creditors who have been paid out to make too much effort to let it be known they’ve got their dosh back. So I’m hoping that the unpaid are among the minority and that his lordship is as solid a citizen as he appears. Have you seen his biography on his website? It’s remarkable how many honorary degrees, non-executive roles and other assorted positions he holds, from Chancellor of the University of Birmingham to an honorary group captain in the RAF. It’s an impressive list.
One thing that impresses me, however, is Karan’s ever cheerful demeanour. Every year, when Cobra’s accounts are published and the scale of his dividends is revealed, I give him a hard time over the issue of his creditors, yet he takes it on the chin and remains charm personified. He doesn’t, like some of the people I write about, get in a sulk and try to shut me out. Quite the opposite.
A few years ago, I spent the day at Queen’s Club, in the days when the championships were still sponsored by Fever-Tree, and by an extraordinary stroke of bad luck, I found myself sitting between Lord Bilimoria and Luke Johnson. The latter had recently lost quite a big chunk of his fortune in the collapse of Patisserie Valerie, while the peer was still smarting somewhat from my latest attack on his failure to fulfil his promise to reimburse his creditors.
Their response to finding themselves playing Scylla and Charybdis to yours truly was highly instructive. While Bilimoria greeted me warmly and was a delight to chat to, Johnson immediately got up, muttered something about not sitting next me and flounced off. Nothing personal was it, chaps?
