Brewdog Administrators Say Funds Insufficient to Pay Creditors

Administrators handling the collapse of Brewdog's UK retail arm say there is not enough money to repay preferential creditors, including HM Revenue and Customs and staff owed £489,000 in wages and holiday pay, according to a report from AlixPartners cited by the BBC. Affected staff have instead been compensated through the UK government's Insolvency Service rather than through the administration process itself.

The Aberdeenshire-based brewer carried more than £500m of debts when it was sold to US drinks group Tilray earlier this year in a deal that saw 38 bars close across the UK and left roughly £20m in unpaid bills owed to hundreds of businesses, the BBC reported. Creditors named in the report include West Ham United FC, Lord's Cricket Ground and the University of Manchester.

Why Won't Brewdog's Retail Creditors Get Paid?

AlixPartners attributed the shortfall to two factors: asset sales that raised less than expected, and additional costs incurred during the administration period, the BBC reported. Among those unforeseen costs was securing closed Brewdog pubs after "unauthorised occupiers" gained access to the properties, the administrators said. AlixPartners said it worked with landlords and lawyers to remove them.

"Insufficient funds" — AlixPartners, in its report on Brewdog's retail administration

How Much Did Selling Brewdog's Assets Actually Raise?

The report details several small-value asset sales that fell well short of covering the shortfall. A 7.8-acre field in Potterton, Aberdeenshire, sold to a local farmer for £41,300, according to the BBC. Nine Brewdog vehicles described in the report as of "old age and varying roadworthiness" produced just £6,250 from a single sale, with the remainder abandoned. A settlement involving drinks equipment sold to Marylebone Cricket Club, which owns Lord's, generated £62,000.

What Happened to the £489,000 in Unpaid Wages?

Staff owed wages and holiday pay will not recover that money through the administration process, the BBC reported. Instead, workers have claimed compensation through the Insolvency Service, a UK government body that pays certain employee entitlements when an employer becomes insolvent. Redundant staff can also claim for unpaid wages through the same government channel, according to the report.

Is HMRC Being Paid at Brewdog's Parent Company?

The insufficient-funds finding applies specifically to Brewdog's retail arm. Parent company BrewDog PLC is still expected to pay HMRC in full for tax it owes, mainly VAT and excise duty, the BBC reported, separating the parent entity's tax position from the shortfall affecting retail-arm creditors.

What Happens to HSBC and Other Big Creditors?

Brewdog's largest single debt was owed to financial services group HSBC across various banking arms, according to the BBC. HSBC has recovered tens of millions of pounds so far but still faces an estimated shortfall of £16.8m, a gap the report said could narrow through further asset sales in the United States.

Private equity backer TSG, which took a 22% stake in Brewdog in 2017, is set to lose £27.6m, the BBC reported. Brewdog also owes roughly £190m to unsecured creditors, who are expected to receive less than a penny in the pound of what they are owed.

In March, 440 staff were made redundant and 736 employees transferred to Tilray after the US firm bought Brewdog's brand and UK operation, according to the report.

What's Next to Watch

• Whether further US asset sales narrow HSBC's estimated £16.8m shortfall
• Confirmation that BrewDog PLC completes its HMRC tax payment in full
• Any updated recovery estimate for the roughly £190m owed to unsecured creditors
• Whether additional unauthorised-occupier incidents add further costs to the administration

The administration of Brewdog's retail arm remains distinct from the parent company's obligations, and AlixPartners' report leaves open the possibility that recoveries from remaining assets could still shift final payouts to creditors.

What Are the Exact Figures Behind the Shortfall?

The retail arm owed HM Revenue and Customs £2.4m in unpaid VAT, a debt now included among the preferential claims AlixPartners says cannot be met, the BBC reported. That figure sits alongside the £489,000 in wages and holiday pay. Separately, BrewDog PLC's tax obligation, the one administrators say will be paid in full, totals £3.66m, mainly VAT and excise duty, according to the report. HSBC's original exposure across its banking arms exceeded £61m, the BBC reported, meaning the bank has already recovered the bulk of that sum despite the remaining £16.8m shortfall.

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