News Article Comments : Orchid property arm close to breach

Recently published accounts from Orchid Group, the managed bar and pub-restaurant operator backed by GI Partners, reveals its property arm is in danger of breaching a banking covenant, according to M&C Report .

The firm’s auditor KPMG flags up concerns over its ability to continue as a going concern, given how close it is to breaching a covenant relating to a loan-to-value test.

The concern relates to a company called Orchid Pubs Properties Ltd, a vehicle used to hold the company’s pub assets — a so-called “propco”. This company has debt of £453.75m.

According to the covenants agreed between the company and its banks, its debt figure must not exceed 82.5% of the value of the group’s properties.

However, the last time the test was carried out — on the 21st of April 2008 — the debt was perilously close to breaching this level, at 82.38%.

The accounts, published in October, express concern over future tests. It states: “Given the current uncertain market conditions and the narrowne