Purpose

The options available to the Council to exit
the current LDL administration, which commenced on 1st April 2022
administration, have been extensively considered, However, whilst
the administrators have tried to engage them several times, the
shareholder has not provided a workable proposal or shown any
ability to raise the money and exit administration. The details
of  the four
options available to the council are set out below:
 
Solvent Exit - The current Estimated Outcome Statement (EoS) identifies the amount required from the
shareholder to enable an immediate solvent exit from administration
is c.£1.322m.  The timeframe for
payment would most likely be before the end of the extended
administration period (30th March 2024).
CVA - Company Voluntary Arrangement (CVA) is
an agreement between a company and its creditors, which sets out
the plan for the repayment of the company's debts, leaving the
directors in control However, this would be reliant on the tenant
adhering to the terms and returns the property to the directors,
giving back full control.  In addition,
it also provides additional time for the shareholder to raise
sufficient funds for a possible solvent exit, concluding the CVA
(and returning control) much sooner than the current estimated date
of September 2027.
Sale of the Hotel - Following improved trading
performance, the sale process has recommenced and interested
parties have been advised of a bid deadline of 18th October
2023.  The administrators have indicated
a successful sale would deliver an estimated payment in full of all
costs, claims and expenses (comprised of cash in the company,
£600k from the FFE fund and release of the £1.95m rent
deposit). However, there is a risk that the time taken to market
and sell the hotel provides the shareholder with the opportunity to
source the funds required to achieve a solvent exit. 
Forfeiture - The Council’s Legal
advisors indicate that whilst the option most likely to achieve the
Council’s primary objective of removing the existing tenant,
the administrator has confirmed that they do not consider that
forfeiture is appropriate in these circumstances (given the ongoing
sale process) and should be considered as a last resort option for
the Council. 
The report is seeking approval:
 
1.  To proceed with the
sale of the property, this will enable the council achieve
it’s
priorities, reach a timely conclusion and return payment in full of
all costs, claims & expenses.
 
2.  Delegate authority
to the Corporate Director of Resources, in consultation with the
Lead Cabinet Member for Finance & Corporate Services to
finalise and approve all relevant legal documentation, arrangements
and activities in relation to the proposed sale.

Decision

Decision:
 
For the reasons set out in
the report and its appendices Cabinet RESOLVED to Agree to:
 

i) 
Delegate authority to the Corporate Director of
Resources, in consultation with the Lead Member for Finance and
Corporate Services to negotiate and finalise the terms of the lease
assignment and variation to the lease with RBH Hospitality
Management, including taking all steps necessary and entering into
the associated legal and contractual documentation to bring this
matter to fruition.

ii) 
Delegate to the Corporate Director of Resources, in
consultation with the Lead Member for Finance and Corporate
Services, to take such other actions as may be necessary to resolve
the matter, for the reasons set out at paragraph 4.8.
 
Alternatives
Considered
 
a) 
The main options or possible outcomes
available to the Council to exit administration and the various
proposals received are contained in the exempt appendices to this
report.  These provide a rough
indication of the outcomes based on current
information.  The exact figures would of
course vary depending on a range of commercial and legal
factors.  Exempt Appendix 4 details
alternatives considered as part of the recommendations made in this
report.