Lord Bilimoria: I plan to clear Cobra debts

Lord Karan Bilimoria has pledged to clear money owed to Cobra Beer's unsecured creditors out of profits from his joint venture with Molson Coors, the Cobra Beer Partnership.

Molson Coors paid £14m to buy Cobra out of administration in May and now owns 51% of the Cobra Beer Partnership, with Lord Bilimoria owning the rest through Bilimoria Holdings Limited.

Around 340 unsecured creditors were owed around £71m when Cobra was forced into administration after an attempt to set up a Creditors Voluntary Agreement was blocked — Wells & Young was owed around £1.9m.

Last night, Lord Bilimoria was challenged at a dinner for journalists on whether he would attempt to pay back the company's creditors.

He said he was working on a "mechanism" by which unsecured creditors would be settled individually by "sharing in the upside of the joint venture".

He added: "I'm adamant I'm going to do it — not at 100% but I want to get as close as possible."

He indicated the offer would not extend to those creditors whose insurance covered their losses.

Asked about the administration, he said: "It was the only way through — it was the least worst alternative."

Cobra, which is currently being brewed by Camerons with a move to Molson Coors brewing facilities in Burton expected in February next year, has an annual 200,000 barrels of sales.

Molson Coors executives indicated that the Cobra brand was profitable from the first day of the joint venture because of the efficiencies that the company could apply to the brand.

It is expected that the brand will sell around 200,000 barrels in its first year with the Cobra Beer Partnership. Molson Coors would not be drawn on how much the Partnership could expect to make in profit if Cobra's sales of £35m a year were maintained.

However, there was an indication that an annual pre-tax profit of £500,000 in the first year would be regarded as a disappointing figure. Marketing spend would be around £10m — lower than historic spend at Cobra — but the "money would be made to work harder".

Molson Coors achieved a 15% increase in profits in its most recent half-year for the UK, a result of focus on more profitable business.

The company's agreement with Heineken UK to brew beer for it means that it's using its brewing facilities very efficiently at the moment. Executives have indicated that they are relaxed about ceding up to a percentage point of its 20% share of the UK market to focus of margins. 

Lord Bilimoria is chairman of the Cobra Beer Partnership. He told journalists that he planned to stay on "almost indefinitely".