The UK’s largest nightclub operator owed more than £120m as it collapsed into administration and cut almost 500 jobs before a rescue deal was agreed, it has been revealed.
Rekom UK, which owned the Atik and Pryzm brands, called in Grant Thornton UK LLP in January after blaming higher energy prices and the impact of the cost-of-living crisis on students for its issues.
Approximately 471 jobs were lost while 17 sites were closed as a pre-pack deal was agreed earlier this month.
According to a new document filed by Grant Thornton UK LLP, the deal was agreed for £19.5m by a newly-incorporated company controlled by Rekom co-founder Adam Falbert and fellow directors Vilhelm Hahn-Petersen and Russell Quelch.
The report has also revealed exactly how much the company owed to its creditors as it entered administration and the circumstances surrounding its decline.
Clubbers take to the dance floor just minutes after Pryzm nightclub threw open its doors to celebrate the relaxing of Covid-19 rules in the early hours of July 19, 2021 in Brighton, England. (Photo by Chris Eades/Getty Images)
The background
Rekom UK was previously known as Deltic Group before it entered administration towards the end of 2020.
The company was the UK arm of Copenhagen-based hospitality group, Rekom which operates more than 150 businesses throughout Denmark, Norway and Finland.
Rekom UK’s brands included Prism, Atik, Steinbeck & Shaw and Heidi’s.
The company had been founded in 1998 and opened its first nightclub in King’s Lynn, Norfolk.
Why did Rekom UK enter administration?
Following its acquisition in December 2020, all of its venues remained closed because of the Covid-19 pandemic until July 2021.
According to Grant Thornton UK LLP’s report, the company was incurring costs of around £900,000 a month during this period.
Despite trading conditions remaining strong for the rest of 2021 once restrictions were lifted, trade began to slow during the summer of 2022.
Grant Thornton UK LLP said: “Whilst trade subsequently improved due to demand from incoming university students, the seasonal decline in trading performance was greater than anticipated.
“In February 2023, consumer spending declined and a new sector trading pattern had emerged.
“The group’s target customers were primarily young people aged between 18 and 25, who suffered the most from the rise in the cost of living resulting in a reduction in hospitality spending.
“Concurrently, the group was impacted by increasing energy costs, alcohol prices and wages inflation, all of which resulted in the group generating losses.
“The directors took action by cutting costs, including but not limited to making redundancies at its head office, reducing venue operating hours and commencing a disposal process for underperforming venues.
“Despite the success of ‘party bars’, large nightclubs were loss making and represent a significant proportion of the group’s portfolio.
“The group was therefore left with no alternative but to seek professional insolvency advice.”
A pre-pack administration deal was secured earlier this month. (Photo by Chris Eades/Getty Images)
How much did Rekom UK owe to its creditors?
According to Grant Thornton UK LLP’s report, Rekom UK owed secured creditor Axiom around £19.6m when it entered administration.
However, following the pre-pack deal, Axiom has received £19m but the remaining £600,000 is unlikely to be repaid.
HSBC, which was also a secured creditor was owed £18,654 and it is expected that it will be repaid in full.
Grant Thornton UK LLP said that claims from the employees who were made redundant are expected to be made but that there it is currently anticipated that there will not be enough funds to enable a distribution to them.
The firm added that it is also expected that HMRC is not expected to be repaid.
According to Grant Thornton UK LLP’s report, Rekom UK had racked up debts with unsecured creditors of more than £100.5m, who are also not expected to receive a distribution of funds.
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