Liquidation for King’s Arms

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the King’s Arms Hotel in Berwick has gone into liquidation with debts of £1.2 million.

However, it is highly unlikely that creditors, staff among them, will get all of their money back as the hotel building, if sold closed as it has been since October, would fetch just £350,000 in a forced sale.

Hotel staff are owed almost £20,000 by the hotel in backdated pay, pay in lieu of notice entitlement and redundancy pay.

At the meeting of creditors, the staff present were also told that their tips from the period up until the close of trading had gone into the company’s account and had been used in trading.

Joint liquidators John Sallabank and Paul Boyle of Reading-based Harrisons Business Recovery and Insolvency Ltd have been appointed following a creditors’ meeting.

Receivers have also been appointed by the Santander UK bank.

The liquidators have made it clear there is unlikely to be sufficient funds to make a distribution to unsecured creditors.

At a meeting of creditors on 
November 9, it was revealed that the book value of the hotel is in the region of £1.34 million, but the company owes £849,000 to Santander UK following a re-mortgage in 2005, trade creditors are owed £24,000, and an inter-company loan of £330,000 is also outstanding.

In total, the company has a deficiency amounting to £1.2 million.

A report submitted to the meeting stated: “During the 1990s the company traded profitably, achieving an average annual turnover in the region of £630,000 until 1998. Then its turnover decreased to £430,000.” The reported added that trading results from each consecutive year after that continued to fall, declining to £353,000 in 2000, but recovering to £493,000 in 2001.

“2002 saw a small increase to £633,000,” said the report, “but this turnaround was short-lived with turnover declining again in 2003. In late 2004, the company again experienced a downturn in its trading as a result of a general decline in the leisure and hotel market in the UK.”

One of the four company directors, Joyce Bates, chaired the meeting, which was held in the hotel. The other company directors are Gordon, 
Lysanne and Mark Currie.

Minutes of the meeting state that the directors attribute the failure of the company, Gate House Hotels Ltd, trading as the King’s Arms Hotel, to the competition in the local market, local authority changes to the road system and parking regulations, and insufficient trade to cover fixed costs in running the hotel.

In terms of local competition, the minutes recorded that directors felt that the opening of the Travelodge off North Road contributed to losses in 2006, combined with the Berwick bypass, which diverted traffic away from the town centre. The expansion of a local caravan park to include an on-site restaurant had also hit the hotel’s food and drink sales.

Over the past three years, the hotel made net losses of £110,000, £93,000 and £29,000 and over the past year the directors had attempted to reduce costs through the closure of one of the hotel’s restaurants and a reduction in staff.

The inter-company loan of £330,000 was from another company owned by Gordon Currie, Greenstar Hotels, which runs The Great House at Sonning, Berkshire.

Alvin De Souza, from Harrisons Business Recovery and Insolvency Ltd, told the Advertiser that the bank-appointed receivers had appointed a management company to run the hotel, and that the keys had been handed over to them at the meeting of creditors on November 9.

He said: “Santander own the legal charge on the property and have 
appointed LPA receivers and have taken control of the business and property and are looking to trade on as far as I am aware.”

The 29-bedroom hotel dates from the 18th century and accommodated the likes of authors Charles Dickens and Lewis Carroll.

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