Debt mountain pushes Mercury Inns into administration
Too much debt pushed Mercury Inns into administration, joint managing director Mark Butler confirmed today.
The Tamworth-based operator's seven pubs - four freeholds and three leaseholds - are now in the hands of accountancy firm BDO Stoy Hayward while buyers for the properties are sought.
The leased pubs are set to revert to the landlords - two with Bedford brewer Charles Wells and one with Enterprise Inns.
Butler said he and fellow director Kevin Thornton were hopeful they could buy back both the leases and the freeholds and continue to run the pubs, "subject to finance and on the open market".
Mercury's other businesses, including Mercury Management, its pub management operation, are unaffected by the administration move.
Butler said the seven pubs under the Mercury Inns banner had been "trading well", and that it had been the scale of the group's debts that had pushed the group over the edge.
"We were advised to do a deal with the tax authorities over our VAT and PAYE liabilities, but around two months ago HMRC decided to discontinue its agreed payment plan arrangements and demanded arrears in full," Butler said.
"We went to our bank, Barclays, who declined to fund the business further," he added. Administration was subsequently inevitable, Butler said.
While cash flow was a short term issue, an underlying problem was the £100,000-a-year rent bill the group was expected to cough up for Harry's Bar in Chorley. The bar, which is closed, had reverted to Mercury after Yesteryear Pub Company, which bought the site, collapsed.
"We refinanced the business three years ago through Barclays but valuations were higher back then, as were loans-to-value, around 80 per cent. Now valuations have fallen by up to 40 per cent and banks are only offering a maximum of 60 per cent loan to value. Things are looking like they'll improve anytime soon," Butler said.
He added that staff at the affected pubs, while technically redundant, could hopefully be re-employed by Mercury Management, which had been hired by the administrators to run the sites.
