Tarsem Dhaliwal, the chairman of DBC and one of three shareholders, personally guaranteed £2m as part of a last ditch attempt to save the company.
Dhaliwal, who has an estimated wealth of £66m according to the Sunday Times Rich List, made the guarantee to secure additional banking facilities from Lloyds TSB on 29 February “whilst efforts were made to determine whether the company could be saved.” The figure is revealed in a letter sent by administrators Baker Tilly to creditors, seen by The Grocer.
The letter also reveals how quickly the situation at DBC unravelled. “The cash pressures escalated in February and early March,” wrote joint administrator Russell Cash. “The directors recognised that the changes in trading conditions derived from suppliers changing credit terms and customers serving notice were to have a significant impact on the immediate cash requirement and future business performance.”
At a meeting between the directors and shareholders Dhaliwal, Malcolm Walker and Andrew Pritchard, on 13 March, one day after Dhaliwal resigned as a director of DBC, “it became apparent that the level of additional support required to enable the company to trade through its difficulties would not be made available by the shareholders.”
By the time Baker Tilly were appointed to advise on a sale the following week, a number of key suppliers were only prepared to deliver if some of their debts were paid. “The company was clearly not in a position to achieve this,” administrators wrote. Keeping the business trading for an extra week would have required incremental funding of £5m, but the banks would not provide any additional funding.
Baker Tilly’s letter also revealed that Brakes paid £300,000 to take on customer contracts worth £100-£120m. The deal was completed on Tuesday 27 March as part of a pre-pack administration.