Back in business

Tucked away on page 17 of Cains Beer Company's last annual report and accounts appears what turned out to be a prescient warning from Mazars, auditors to the Liverpool brewer.

Published in April this year, the auditor's statement said: "[Cains] is currently renegotiating the financial covenants attached to [its] loan and other facilities and may require an increase in its bank overdraft facility when this becomes due for renewal in June 2008."

Such a situation, the firm added, "indicates the existence of a material uncertainty which may cast significant doubt about the group's ability to continue as a going concern".

Make or break

Such uncertainty proved to be telling. In July, at around the same time as 'make or break' discussions were taking place with its bank, HBoS, Cains revealed losses of £4.5m for the six months to the end of April.

It also announced the departure of finance director Paul Morgan, whose appointment from gambling giant Stanley Casinos a mere two months earlier had been described by Cains as "the final step in the assembly of an experienced and highly talented board of executives to drive the company and its brands forward, so as to fulfill its vision of becoming Britain's favourite beer company".

The losses came at the worst possible time for Cains chief executive Sudarghara Dusanj and his brother Ajmail, the group's chief operating officer.

By then the brewer was facing a battle for its very survival. While trading in its newly acquired pub estate - Honeycombe Leisure - was getting tougher, Cains was rumoured to be saddled with debts in excess of £35m. The company meanwhile said it had agreed "in principle" a plan to settle an outstanding tax bill.

However, efforts to convince HBoS to back Cains failed and the scale of its liabilities - including a tax demand of £13m - took its toll. On August 7 the brewer went into administration.

Potential buyers, looking to snap up the old Victorian brewery and the not insignificant chunk of land upon which it sat made a bee-line for the offices of administrators PricewaterhouseCoopers (PwC).

But a complicated lease structure, involving a Dusanj family company which owned the freehold to the site, meant interest soon evaporated.

It then became clear that the Dusanjs were favourites to buy back the company, and on September 19, at four minutes to midnight, PwC announced a deal had been struck.

That the pair were back in control appalled some, but PwC said they were the only party to table a realistic offer to buy the business as a going concern and secure the majority of the jobs at risk; other bidders had planned to "strip the assets and run", one observer said.

The next step

So what will the Dusanjs do now? Rebuild the business and rebuild trust across the wider industry, hopefully. Unwilling to talk on the record, the brothers apparently want to give former Cains suppliers the opportunity to work with them again, though for some this will require a considerable leap of faith.

The brothers, meanwhile, argue they took the best advice in moving for Honeycombe - into which they pumped £3.5m of their own money - just as the English smoking ban was about to commence.

Relatively speaking, some small suppliers lost equally significant sums and are unlikely to be appeased by news of the Dusanjs' own deficit.

The Dusanjs' new company, Robert Cain & Co, is free of any obligation

to pay money Cains owed its banks, suppliers and former employees. Neither PwC nor the Dusanjs would discuss payments to former creditors, although one former Cains pub manager told The Publican he'd recently been awarded £41,000 for wrongful dismissal but "didn't expect to see a penny".

Going forward, can the Dusanjs repair their reputation?

They are certainly keen to do so, recognising that, like them, people are disappointed in how things have turned out. Cains had canned beer for the likes of Adnams, Greene King and Shepherd Neame; will these companies continue to do business with the new Dusanj company? The answer appears to be 'yes'.

One said: "We want to see companies in the sector well managed and able to work through their problems. If they get their house in order and are able to operate we would be idiotic not to consider them [as a partner]."

As they steer their new operation tentatively forward Sudarghara and Ajmail Dusanj will doubtless be working on their bridge-rebuilding skills.

For a pair keen on being seen as the 'good guys', they've got quite a job on their hands…