Fri, 24 Jul 2020 | ADMINISTRATION
Burrito chain Chilango has given notice of its intention to appoint administrators, putting the money of small investors in its “burrito bonds” scheme at risk. The chain, which has 12 sites, is working with restructuring agents RSM to pursue a sale. A source has said that a pre-pack sale is expected within two to five weeks.
Over 1,000 investors bought mini-bonds worth £5.8 million in two fundraising efforts by the restaurant chain. The scheme promised investors returns of 8 per cent a year, but the company warned investors in December that it was in need of rescue restructuring and entered a CVA.
The company said that the vast majority of bondholders had opted not to preserve their principal investment or rate of return in a new preference share class at the time of the CVA. Chilango then paused this conversion.
If the chain does enter administration, bondholders may be reliant on recouping some of their money from the sale of Chilango’s assets, which the company warned last year could lead to a 99 per cent loss on their investment.
Chilango said that following its restructuring it had returned to positive trading and was on track to deliver budgeted group EBITDA of more than £800,000. However, the company says that, like many other restaurant chains, it had then been hit hard by the COVID-19 lockdown.
In a letter to shareholders, the company said: “No business could have foreseen the impact the coronavirus crisis would have on our industry, with few sectors being hit harder by the pandemic than hospitality.”
“During this period we have done our very best to mitigate the pandemic’s impact, operating as much as is safely possible while implementing the various government support measures available. Unfortunately, these efforts have not been sufficient to secure the future of our business.”
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