The crisis engulfing Britain’s high streets will deepen on Wednesday when Gaucho, the steak restaurant chain, crashes into administration after its lenders opted not to pursue a rescue deal.
Sky News has learnt that the company, which employs about 1,500 people, has filed a notice of intention to appoint Deloitte as its administrator.
While that gives it up to ten days’ breathing space from creditors, sources close to the company said it could fall into administration as soon as Wednesday afternoon.
The decision will come after weeks of talks about a sale to new investors, with the restaurant entrepreneur Hugh Osmond among those who examined a potential deal.
However, insiders said the failure of Gaucho’s lending syndicate to unanimously back any of the proposals had made the company’s insolvency inevitable.
The plunge into administration is the latest grim news to affect a prominent brand trading on the high street, with Toys R Us UK, Maplin and Poundworld all having called in administrators this year with the loss of thousands of jobs.
Sources said they expected the Gaucho chain of restaurants, with 16 outlets, to emerge as a “viable business” from the administration, although the loss-making CAU-branded chain is likely to close.
Sky News revealed late last week that Gaucho was racing to find new investment to pay a seven-figure tax bill, with Her Majesty’s Revenue & Customs (HMRC) now facing the prospect of that demand being unmet.
In a statement issued in response to an enquiry from Sky News, a Gaucho spokesman said: “Despite an extensive options process which attracted proposals from a number of parties, it is with regret that due to the complexities of the group’s legal structure, ongoing underperformance at CAU and the level of indebtedness, the directors have been unable to find an agreed, solvent solution.
“Consequently, the directors have today filed in court a notice of intention to appoint an administrator for the business.
“Until such time as the administrator has been appointed and agreed plans with management, it is business as usual.”
Details of the rescue proposals remain patchy, although none of the four known suitors – Osmond Capital, Core Capital, which is owned by ESO Capital, Limerston Capital and the current owner, Equistone – offered to pay close to the £50m owed by Gaucho to its banks.
Under the management team’s proposals, the Gaucho chain would have continued to operate while CAU would – if approved by creditors – close through a mechanism called a company voluntary arrangement (CVA).
The slump to the brink of administration has come after CAU saw double-digit declines in like-for-like revenues, with over-expansion, poor site selection and onerous lease arrangements among the factors now contributing to Gaucho’s financial difficulties.
Gaucho recently appointed a new management team in an attempt to stabilise its financial performance, although it has limited experience of the restaurant sector.
The company’s founder, Zeev Godik, stepped down several months ago.
Gaucho now joins rival casual dining chains such as Byron, Carluccio’s, Cote and Prezzo, all of which have cut significant numbers of jobs this year.
A combination of rising costs and more cautious consumer sentiment has hit casual dining businesses, while retailers including Carpetright, Marks & Spencer, Mothercare and New Look have announced plans to close scores of shops.
From – SkyNews