Revolution Bars secures High Court approval of restructuring plan
The hospitality business is ‘heavily loss-making’ and ‘deeply unprofitable’, a judge was told.
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Your support makes all the difference.Troubled bar firm Revolution has secured a High Court’s judge approval of a restructuring plan, after arguing it was needed to save the business from collapsing into insolvent administration.
Revolution Bars Limited, part of a group owning the Revolucion de Cuba and Peach Pubs brands, is “heavily loss-making” and “deeply unprofitable”, the court was told.
Lawyers for the business, a subsidiary of Revolution Bars Group plc, said it was reliant on funding from the group “in order to survive” but it was forecast to “run out of cash” in August.
At a hearing in London on Thursday, Mr Justice Richards approved the plan, concluding it was “not unfair” to creditors, landlords and shareholders.
The restructuring scheme will amend Revolution Bars Limited’s obligations under a fully drawn £30 million “revolving credit facility” with NatWest bank and extend the time to pay its tax debt, its legal team told the judge.
It will also feature the “right-sizing” of a portfolio of leases “in order to create a sustainable business”.
Tom Smith KC, representing Revolution Bars Limited, told the hearing that the firm and its parent company had “run into financial difficulties” and faced being unable to pay debts without the restructuring plan between it and creditors.
The judge asked: “The Revolution brand or business is in danger of taking the whole group down with it as matters stand?”
“Yes, that’s broadly right,” the barrister replied.
With an unprofitable business and no cash, unless the restructuring is successful, the group companies will, save for the Peach Group, collapse into insolvency processes.
In written arguments, Mr Smith said the company held 48 leases linked to 43 sites across the UK, six of which – Southend, Torquay, Beaconsfield, Derby, Wilmslow and Liverpool St Peter’s Square – were no longer trading.
Like other hospitality businesses, the Revolution group was “adversely affected by the Covid-19 pandemic and suffered significant losses as a result,” Mr Smith said.
He added that it had “remained subject to serious financial pressures as a result of, among other things, inflationary pressures, labour shortfalls and the trend towards working from home”.
Revolution Bars Limited was “balance sheet insolvent” with assets of £49.6 million but total liabilities of £118.7 million, the judge was told.
The business “continued to perform poorly” and when the restructuring plan was launched was forecasting a loss of £15 million in the financial year to June 29 2024.
It is also £48.1 million in debt to sister firm Inventive Service Company Limited.
Mr Smith said: “With an unprofitable business and no cash, unless the restructuring is successful, the group companies will, save for the Peach Group, collapse into insolvency processes.”
He said the plan would see £4 million owed to NatWest written off and a repayment date extended from October 2025 to October 2028
Revolution Bars Group plc will have an “interest holiday” in 2024, while NatWest will receive warrants over 10% of the enlarged share capital of the parent company.
A payment of £2 million in HMRC tax debt will also be deferred to September 6 2024.
Revolution wants to retain 14 of its “most profitable sites”, while 18 sites are considered to be “economically unviable”, Mr Smith said.
The barrister said a sale process announced by the parent company in April returned six offers, the best of which were £16 million cash for the Peach Group and £10 million cash for profit-making sites and assets within Revolution Bars Limited and De Cuba brand.
It was decided that the proposals could not be delivered in the time available and would deliver worse returns to creditors than restructuring, he said.
A separate non-binding share acquisition proposal from competitor Nightcap was also rejected by the Revolution group.
Mr Smith said proposals to issue new shares in the Revolution Bars Group plc had raised around £12.5 million, but this was conditional on the completion of the restructuring plan.
“If all new shares to be issued through the fundraising are taken up, existing shareholders will be diluted by 84.6%,” he added.
Mr Smith said there were “no blots or potential blots” in the restructuring scheme, adding that it was designed to ensure that all creditors are paid more under the plan than they would receive under an insolvent administration process.
Mr Smith said “a small number” of landlords had voted against the plan, adding that there had been “no attempt to articulate any reasons for their opposition” and “no reason has been advanced before the court as to why the plan should not be approved”.
The restructuring plan received “overwhelming” support from creditors who cast votes at meetings in July, the lawyer said.