Setting an example, or not
Lord Bilimoria, a parachuted peer of New Labour’s making, founded Cobra Beer twenty years ago, initially supplying lager to Britain’s curry houses before aggressively expanding into pubs and supermarkets.
The rapid growth was at the expense of profits and last year the firm suffered a loss of GBP 13 million, it was reported.
Strapped for cash, Lord Bilimoria put his business up for sale, but given the economic situation in the UK and declining beer sales, no one volunteered to take Cobra Beer off his hands.
According to The Sunday Times, Cobra Beer owed GBP 69.7 million to unsecured creditors by the time it collapsed three months ago.
Cobra Beer owes investors GBP 57.3 million and the taxman GBP 6.4 million. The remaining GBP 6.0 million are owed to 330 unsecured trade creditors, many of whom are fighting for survival in the economic downturn.
Administrators have advised them that they will not get their money back.
Lord Bilimoria has since been able to revive his fortunes through a pre-arranged deal, known as a “pre-pack”, to buy back Cobra Beer. At the end of May, Lord Bilimoria set up a joint venture with Molson Coors, the American brewer, to acquire the Cobra brand in Britain.
The new joint venture, Cobra Beer Partnership, will produce and market the beer. Molson Coors agreed to pay GBP 14 million (EUR 16.5 million) for a 50.1 percent stake, with Lord Bilimoria owning 49.9 percent and remaining chairman, it was reported.
Pre-pack deals, such as Lord Bilimoria’s, are legal but they have been criticised for enabling directors to jettison debts and loss-making parts of a business at the expense of creditors.
Among those, who can wave good-bye to their outstanding money, are Pop Displays, which produced printing and packaging for Cobra retail promotions. It is owed GBP 31,129 (EUR 36,700).
Chris Hall, its Managing Director, told The Sunday Times: “How can someone dump all their debts on creditors and then the next day walk into what is effectively the same business with a 49 percent stake?”
MicroMatic, a manufacturer of draft beer dispensing equipment, is reportedly owed GBP 60,143.
Someone familiar with the situation was quoted by The Sunday Times, saying: “Perhaps we were naive in being so trusting and perhaps we should have asked for staged payments but the brewing industry relies on trust.”
Looks like new times have arrived, and by the look of things, the brewing industry will be in for a hard landing.
