London craft brewery Forest Road has been sold in a pre-pack administration deal to a company founded by its existing director, after a last-minute investment deal was scuppered following a winding up petition filed by HMRC.
The deal, completed to the tune of £370k, has seen Forest Road’s assets, intellectual property and brewing equipment transfer to a newco called Posh & Co Breweries.
All 18 employees have transferred to the newco, which was founded by Forest Road director Pete Brown in June 2024. Brown has since resigned from the company, which now lists Forest Road co-owner and brewer James Garstang as its sole director.
The sale price compared “favourably” to a £174k valuation made by independent asset appraisal, advisory and trading business SIA Group, Forest Road’s administrators James Saunders and Michael Lennon, of KR8 Advisory, wrote.
It also secured “a reduction in overall creditor claims of additional £112k” as the purchaser had agreed to waive their right to a claim in the insolvency estate, they added.
Significant arrears
Forest Road was founded by Brown in Hackney in 2014 and its Posh Lager is sold in Sainsbury’s stores. It relocated to Bermondsey as part of a substantial expansion in 2020.
The supplier fell into significant arrears to HMRC after the Covid-19 pandemic halted trade immediately following this relocation, according to its administrators.
After a market downturn and raw material inflation put further pressure on finances, the brewer sought additional investment from overseas investors last year.
However, after Forest Road failed to keep up with its payment plan to HMRC, monthly repayments were hiked to £60k a month.
This “became unsustainable” for the company, the company’s administrators wrote, meaning additional investment was required.
Forest Road had sought a £3.3m cash injection from a US-based investor to “to regularise the HMRC arrears, to pay off certain loans and to also provide the business with working capital funding required in order to meet its increasing sales order book”, the administrators said.
It was at an “advanced stage of discussions” with “investment documents largely agreed and funds held on escrow” when HMRC filed a winding up petition over unpaid debts on 11 June.
Following the filing, the overseas investor “immediately withdrew its interest in providing the agreed funding”, leading to KR8’s introduction and subsequent appointment as administrators.
Shortfall to creditors expected
There was likely to be “insufficient property to enable a distribution to be made to non-preferential unsecured creditors” totalling £2.7m, the administrators said.
This included over £1m in unpaid beer duty to HMRC, as well as £497k to trade and expense creditors, a £29k bounceback loan from Barclays and a further £1.1m in other, unspecified loans.
HMRC is also owed around £744k in unpaid VAT, PAYE and NIC, with an expected shortfall of £601k following the conclusion of the administration and sale process.
Forest Road Brewing Co was approached for comment.
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