Orchid Group announces financial rejig
Orchid Group, the private equity-backed managed pub group, has announced the completion of a financial restructuring which, it claims, will strengthen the business.
The future of Orchid has been in doubt for some time, with industry insiders speculating on the viability of the 300-strong pub and bar operation as trading toughened across the sector in recent months.
A brief spell in administration has been followed by the bulk of the business being bought back by existing management in a 'pre-pack' deal.
David Chubb, partner at PricewaterhouseCoopers (PwC) and joint administrator of The Orchid Group said:
"We are extremely pleased to have been able to effect an immediate sale of this business, particularly in the lead up to the festive season. Through the sale of the business, we have been able to save at least 240 of the group's pubs and 5,300 jobs across the UK."
As part of the main transaction an option to purchase the remaining sites has been sold. The administrators said they were hopeful that these will be able to continue and they are now working with the purchaser to seek and secure the survival of the remaining 48 pubs.
Orchid was formed two years ago when US private equity firm GI Partners bought 290 ex-Spirit pubs - which formed the Orchid estate - from Punch Taverns for £571m, an amount some suggested was excessive, even for the time.
Some reports suggested the group was about to go into the hands of administrators, claims consistently rejected by Orchid's management and GI Partners.
However it is understood Orchid had been in talks with insolvency experts at accountants PricewaterhouseCoopers for a number of weeks over how to reschedule aspects of the group's finances.
Part of the arrangement is believed to involve Orchid's banks, HBoS and Deutsche Bank, taking a small stake in the business in return for relaxing the terms of its banking covenants.
In a statement issued today (Saturday) Orchid said: "The restructuring will ensure that Orchid has the financial flexibility to trade through the current economic environment and to aggressively lead the anticipated consolidation of the managed pub sector.
"Under the agreed restructuring, the vast majority of equity remains with the original shareholders. Most of Orchid's structure has stayed the same but the overall pub portfolio has been marginally reduced from 287 to 260." It is believed a number of leases might be reverting either to the head lessors or the properties' original freehold owners.
No details of the amount of money involved in the arrangement were made public.
Orchid's statement went on: "The dynamics within the structure have been revised to reflect the challenging economic climate predicted for 2009 and beyond, and to allow the flexibility to expand the business through the acquisition of distressed assets."
It is understood Orchid has at least two such "distressed" rival operators in its sights.
The group said restructuring has the full support of Orchid's management team, GI Partners and its lending banks.
Rufus Hall, Orchid's chief executive, said: "This successful restructuring has the effect of 'recession proofing' our business as well as putting Orchid in a very strong position to lead any sector consolidation."
Phil Kaziewicz, managing director of GI Partners, said: "We fully support this restructuring, which has been led by Orchid, and we have worked effectively with our lending banks to support the future aspirations of the business.
"Orchid is now very well placed for the future and we look forward to continuing to support the business as it grows further and in particular embarks on its acquisition strategy."
