O'Brien's Sandwich Bars UK arm set to be wound up with debts of £4.8m

THE BRITISH arm of O'Brien's Sandwich Bars is likely to be wound up with a £4.8 million (€5

THE BRITISH arm of O'Brien's Sandwich Bars is likely to be wound up with a £4.8 million (€5.56 million) deficit, but the franchise business there will continue to trade through a new company established earlier this year.

O'Brien's Irish Sandwich Bars (UK) and its sister company, O'Brien's Irish Sandwich Bars (UK Property) were placed under the protection of the English high court in mid-June after the group ran into difficulties on both sides of the Irish Sea.

Both are in administration, a company rescue mechanism used under British law. A statement of affairs for the sandwich bar business shows that it has a £4.8 million shortfall, while the property company has a £3.4 million (€3.94 million) deficit.

Administrator Cameron Gunn, of corporate reorganisation specialist Resolve, lodged the figures with the British Companies Office within the last week.

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It is understood that both firms now face the prospect of liquidation. However, its British sandwich bars will continue to trade as the group transferred the franchise agreements for those businesses to a new company on June 1st.

The new company, O'Brien's Franchising UK Ltd, took over the franchise agreements from the group's Irish parent, O'Brien's Irish Sandwich Bars.

The Irish parent, controlled by founder Brody Sweeney, bought the franchise agreements from its subsidiary O'Brien's Irish Sandwich Bars (UK), last December for £1.19 million (€1.38 million), as part of a group reorganisation.

In a recent letter to franchisees, Mr Sweeney says the new UK operating company, O'Brien's Franchising, "is completely unaffected" by either the administration process in Britain or the fact that the High Court in Dublin placed its Irish parent in examinership last month. The correspondence also points out that franchisees in Britain will pay their royalties - the group's main source of income - to the new company.

The group's reorganisation was geared at taking it out of property. The operating companies in both Britain and Ireland leased the premises occupied by the chain's outlets and sublet them to franchisees on the same terms.

The group ran into difficulty as sales fell in its restaurants, while its also became liable for rents on empty units. In Britain, it has been renegotiating terms with its landlords and is transferring the leases to the franchisees themselves.

In his letter, Mr Sweeney tells franchisees that the "process in the UK is going broadly to plan", while the group decided to place the Irish company into examinership in order to deal with its problems in this country.

"We have also taken legal and financial advice and we have decided on both courses of action for the UK and Ireland, which will be in the best interests of our franchise partners firstly and O'Brien's corporate secondly," he says.

Administration and examinership are different processes. Administration is limited to the UK and is geared at recovering the maximum amount from troubled companies for their creditors. If this cannot be achieved any other way, the business is wound up.

Examinership is limited to the Republic and aims to give insolvent companies with a reasonable chance of survival the breathing space they need to put together a rescue plan acceptable to their creditors.

Barry O'Halloran

Barry O'Halloran

Barry O’Halloran covers energy, construction, insolvency, and gaming and betting, among other areas