Pre-pack administration: Stay upbeat, despite the pain

Bar Group went through a pre-pack administration last month. Boss Paul Wigham reflects on the sometimes harrowing experience.

We had two pub businesses that were lease-based, mostly with pubcos. One of them had struggled for some years with heavy debt financing that the sites could not service and, last month, we put it into administration.

It's a classic case of buying when the market was at its peak using debt, but market conditions eroded the ability to service that debt. We are not looking for anyone else to blame. The rents were right when we bought in 2003, but with the on-trade in decline, rising costs and uncontrollable supermarket competition, we were always going to suffer, particularly as we are wet-led.

Now, we have the experience of different insolvency practitioners from different firms, along with business reviews demanded by banks and a Company Voluntary Agreement, in addition to other situations.

Administration is not fun and at times can be genuinely scary, especially when people tell you how your actions could lead to you being hit personally with massive fines and imprisonment, while you stare at the ceiling thinking about how much personal cash and time investment you have lost.

And that's before you start to worry about those personal guarantees you so willingly gave when the sun was shining!

Positive outlook​

By trying to remain positive though this harrowing experience, we were able to buy back parts of the business and protect the homes and livelihoods of some of our staff using new investment into the company. We are not the first to go through this, but given the number of high-profile administrations that take place, some of you may be curious to understand the experience — and, believe me, 2010 will see lots more as the devastation of trade last year continues to take its toll.

Administrators — their job is to recover as much as they possibly can for the company's creditors, but they also exist because it is a profitable thing to do — there are fees to be generated in this process. Administration fees eat creditor pots like piranhas eat cows and the process is similarly frightening to watch.

Anecdotally, I know of another leasehold administration in the past two years where the fees exceeded £1m in the first year alone. That is not unique. So when you think that the way in which they are behaving is not in the best interests of the business or employees, don't be surprised — that is not what they are there to do. They won't be investing; they will be squeezing the pips. They control everything, and it doesn't matter that someone else altogether might have bought and paid for it.

Landlords — never forget that even though you have never missed a rent payment with a private landlord, they have no interest in pubs and the past will count for nothing.

Communication is the key​

However, with Enterprise Inns, the experience has been different. I am no pubco apologist — and as many of you know, I have been publicly critical of them many times in the past. I know the bloggers and my Independent Pub Confederation colleagues will hate me for saying this, but we could not have asked for a more supportive ally in this process. Let's hope they can keep that going because they need their lessees' support as much as we need theirs.

One final point to note for anyone going into the administration process. Your business is very personal to you — you live and breathe it. It is not personal to the administrator, who might talk to, say, an insolvent biscuit-maker when he puts the phone down on you. He does not have your degree of personal involvement.

Be tough; protect everyone's interests, including your own and those of your people, and don't just lie down. Do the "right thing" and keep communicating with the key players, such as landlords and suppliers. Don't expect them to be delighted at the situation, but if you have acted properly and honestly, you have nothing to fear. It pays in the end.