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Fri 22nd Aug 2014 - Administrator reveals Greenwich Inc 'nightmare' – and settlement
Administrator reveals Greenwich Inc 'nightmare' – and settlement: A 40-page report by the administrator of Greenwich Inc, the company run by the American businessman Frank Dowling, has revealed multiple difficulties in unravelling the company’s complex structure, and the lack of co-operation the administrator came across after Greenwich Inc was placed in administration in November last year. The administrator reported that the company was run from an office in Park Street, London, to which it did not have access as it was “refused access by the occupier”. The administration had to “piece together the list of suppliers from the small amount of information found at the sites”. It was discovered that every venue run by the company had been cleared of cash as well as a number of items previously on display. The administrator said: “With no money in the tills, the company’s ability to trade had been seriously affected. However, with the introduction of personal funds from one of the joint administrators, the venues were able to open over the first weekend. It quickly transpired that none of the staff had been paid for the work they had done in November, a situation they were not unaccustomed to.” Greenwich Inc held three leases at the O2 Arena in Greenwich, the American Sports Bar and Grill, Union Square and Inc Club. The administrator said: “The company also owned a corporate box at the O2 Arena. The situation regarding the box was unclear. One of the administrators interviewed the occupants of the box for one of the events and discovered that they had purchased their tickets through an agency. These tickets included the right to free food and drink at American Sports Bar and Grill. The joint administrators were not able to identify any income stream coming into the business. The landlord of the O2 Arena, AEG, gave a great deal of assistance to the joint administrators in understanding the issues and the costs of the box so that the value of retaining it could be assessed. The joint administrators were soon able to judge that it had no immediate value and with the agreement of AEG the box was surrendered.” Of the three O2 sites, Inc Club was closed and the administrator traded the two others while AEG marketed the premises. “In order to minimise the disruption to the business we honoured many of the bookings that had been made pre-appointment, even though deposits for these events have not been recovered from Dowling’s companies,” the administrator said. The sites were traded until Sunday 6 April and then handed back to AEG. “Once the trading results at these sites had been collected it transpired that we had achieved a net profit of £128,945, which was paid over to AEG in line with [a reduced rent while trading] agreement. After allowing for the reduction in rent, the two sites at O2 have broken even during the trading period.” The American Sport Bar and Grill was re-let to Mitchell & Butlers, which opened an All Bar One at the site in July. The administrator reported that Madison at St Pauls offered the most chance for financial recovery. It said: “At the time of appointment, the Madison had already been transferred to Madison Lease Ltd (a company controlled by Mr Dowling) for no consideration. Nothwithstanding the point, the Land Registry recorded that the company remained the leaseholder and so the joint administrators acquired possession of the Madison. Trading was continued at the Madison in order to maintain the value of the business while the legal dispute as to ownership continued. The venue suffered from a number of issues relating to its occupation. Madison derived a substantial amount of its profits from its drinking clients but its occupation was limited to providing sit-down meals. The company was also occupying areas of the rooftop which it was not entitled to do. There were also issues relating to planning permission for its business. In addition, under the control of Mr Dowling, it had potentially committed a number of breaches of the lease relating to fire exits and usage of other storage areas. As a result of the occupation of the Madison, the joint administrators faced a legal challenge for trespass for their period of occupation. The landlord issued the joint administrators with a Draft Section 146 notice requiring repair work to be undertaken. These repairs would have run to many hundreds of thousands of pounds. The landlord also claimed the turnover rent had not been paid for some time and that the rent was therefore over £500,000 in arrears. The further and significant dispute that then occurred was as to the ownership of the property. This resulted in proceedings being issued by the joint administrators in February 2014 alleging the transfer of the lease was a transaction at undervalue. The intention was for the transfer of the lease to be reversed.” The property agent Fleurets marketed the site and an offer from D&D Restaurants for £4.5m was accepted despite it not being the highest offer after the landlord expressed a preference for the company as tenant. “The lease arrears and other defects meant that there more likely to be a successful sale if the landlords supported the transaction,” the administrator said. Legal steps were taken to procure the consent of Dowling to the sale. D&D Restaurants undertook due diligence, discovered defects in the lease and then offered either £4m, or £1m of the offer to be made conditional on the performance of the site. But a sale was eventually agreed with a payment of £750,000 of the £4.5m total sum deferred for a period pending D&D successfully obtaining the legal rights to use areas currently occupied by Greenwich Inc. The administrator said it thought the money will be paid within a year. The company has, however, been fined £20,000 after immigration officers found two staff members working at Madison who had not adhered to the terms of their visas, a fine reduced to £8,000 on the basis that they had been recruited prior to the administrator's involvement in Greenwich Inc. The administrator reported that one member of staff had found his Child Support deductions had not been paid “so he had gone to Mr Dowling’s house and demanded that he repay him, resulting in Mr Dowling giving him £5,000 in cash.” The administrator revealed a settlement has been reached with Dowling, to avoid very complex and expensive litigation, which meant a sum of £850,000 was to be paid over five years in equal monthly instalments starting on 1 September. A further sum of £454,000 is to be paid over five years in respect of antiques owned by Greenwich Inc's sister companies. Charges have been placed on Dowling’s home and other properties as security over the £850,000. Antiques to the value of £454,000 have also been pledged by Dowling to the joint liquidators of Greenwich Holdings as security for the antiques sum. The settlement means creditors “obtain a substantially better outcome with regard to costs and being able to realise the value in Madison now.” The administrator added: “Counsel suggested that the different [legal] actions could be combined, meaning a single three to four-week trial next year.” Unsecured creditors are owed £15.04m and the administrator will make a payment of £1.3m to all classes of creditor once the company has entered liquidation. The first six months of the administration cost £617,000.

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