Cains on the brink as rescue deal is rejected

Aug 2 2008 by Alex Turner, Liverpool Daily Post

THE owners of troubled Liverpool brewer Cains last night pledged to keep fighting despite its bankers rejecting plans that could have saved the iconic city firm.

The Bank of Scotland yesterday said it would not support the company’s turnaround plans which means Cains must go to the High Court on August 12 to face a winding-up petition from HM Revenue and Customs (HMRC).

Ajmail Dusanj, who runs the brewer alongside his brother, Sudarghara, said they were determined to continue working on rescue plans.

“Yes, we are still fighting and we will try everything,” he said. “We haven’t given up. It’s a great business with a great future, but anyone looking short term won’t see that.

“We have to think over the weekend about what to do but we still want to make it work.

“We’re honourary Scousers – we don’t give up that easily.”

And he praised his workforce, which includes around 100 at the Stanhope Street site and 900 working in its pubs.

He added: “The workers were surprised but they are still giving the company 110% and they continue to do so. They have been fantastic.

“It’s difficult but they are totally committed to Cains. We have a great team of people.”

Cains appeared to lose its fight for survival yesterday after the Bank of Scotland said it would not support the company’s turnaround plans.

It had an agreement in principle with HM Revenue and Customs to pay an overdue tax bill but needed the bank’s support for the payment plan. It now faces a winding-up petition at the High Court on August 12.

Shares in Cains Beer Company were immediately suspended on the Alternative Investment Market yesterday afternoon once the bank had said it would not provide further funding.

The brewer had requested a suspension of trading in its shares “pending clarification of the company's financial position”.

In a statement, it said: “The directors believed that the company would be able to reach agreement with its bankers regarding appropriate levels of funding.

“The company's bankers have now informed Cains that they are not prepared to support the proposals that have been put to it by the company.

“A further announcement will be made as appropriate.”

The future of the company had been in doubt when it emerged last week that HMRC had lost patience with the brewer over an unpaid tax bill.

And the picture worsened substantially on Monday when Cains released its trading figures to April, which showed six-month losses of £4.6m and a forecast that full-year losses would be “higher than expected”. It admitted the figures “may cast significant doubt on the group’s ability to continue as a going concern”.

The Dusanj brothers have worked hard to turn the fortunes of the brewery around, and appeared to be having some success. They grew the Cains brand and got the brewery working for 120 hours a week compared with the 24 hours a week it operated for when they took it over in 2002.

But Cains recorded losses of £2.8m in the 14 months to October 2007 and the latest figures showed the firm was handicapped by its £37m reverse takeover of Honeycombe Leisure in May last year.

This saw Cains acquire 92 pubs and a listing on the Alternative Investment Market but the pub sector has been hit by falling revenues – which the company blamed on declining consumer confidence and the effect of the smoking ban – and rising costs. Pub sales fell 15% during the half-year and has continued to trade below last year.

The Bank of Scotland provided £40m, of which £30m was a loan facility, £5m in working capital and £5m to fund refurbishment of the pubs.

The firm’s latest balance sheet shows that £35m of debt remains on the company’s books and it was paying about £200,000 a month to service the debt.

Cains had been in talks with its bankers about its debts since at least April with discussions becoming more urgent after HMRC’s action.

The Bank of Scotland said it was unable to comment due to legal issues and client confidentiality but a spokesperson did say “we have done everything we can to find a solution”.

Despite the announcement, there remained hope that Cains could still be saved.

MP Louise Ellman, whose Riverside constituency includes the brewery site, said: “I am not giving up.

“I have been working with the company for some time and I am continuing to try to find a solution.

“It’s a very significant employer, employing a lot of people in a high-profile industry.

“I’m working closely with Cains and the NWDA and I’ve also been in touch with the union and the Government minister, John Hutton. This is clearly a serious situation but we are all working together to save the brewery.”

A spokesperson for the NWDA confirmed that it had met with Cains yesterday before the bank’s decision was known and would be looking to meet with the company again to see how it can help.

Cains is the official beer sponsor to Liverpool 08 but the Liverpool Culture Company refused to reveal if the firm owed money on its Capital of Culture contract.

OPINION: PAGE 6

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