Orchid goes through a pre-pack administration
The Orchid Group has undergone a pre-pack administration.
PricewaterhouseCoopers was appointed administrator last Friday with a total of 260 of the company's pubs taken straight out of the administration into a new company led by existing management. The company's banks are understood to have taken a small equity stake in the new business in the wake of the administration.
David Chubb, partner at PricewaterhouseCoopers LLP 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."
As part of the main transaction an option to purchase the remaining sites has been sold. 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.
In a statement 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.
"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." Rufus Hall, Orchid's chief executive, added: "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."
Business Opinion by The PMA Team
Orchid's pre-pack administration is, as has happened with other pre-packs this year, a deft side-stepping of onerous lease obligations. When Orchid acquired the original package of 290 odd pubs from Punch it included a number of pubs that had gone through a sale and leaseback when Spirit, its managed division, was under private equity ownership. The prevailing view was that a number of these pubs were over-rented - or heading that way. Like Laurel Pub Company and Herald Inns and Bars before them this year, a pre-pack provides a straight-forward way of dumping those sites that are on-going burden.
