Rekom - Case Update

The joint administrators of Rekom have revealed what led to the UK nightclub giant’s administration, and have provided details into the pre-pack deal agreed with a company connected to Rekom’s co-founder and fellow directors.

The Rekom Group acquired the business and assets of the Deltic Group out of administration in December 2020. Following the acquisition, all venues remained closed until July 2021 due to the pandemic. During this period, the company incurred approximately £900,000 in costs per month which it was unable to mitigate.

Trading improved when restrictions lifted, but began to slow again during summer 2022. By 2023, the Rekom Group was suffering from a decline in consumer spending among the group’s target customers - primarily young people aged between 18 and 25 - who suffered the most from the rise in the cost of living resulting in a reduction in hospitality spending. The group was also impacted by wages inflation, increasing energy costs and alcohol prices.

Despite various cost cutting measures taken by the directors, the Rekom Group’s large nightclubs were loss-making and represented a significant proportion of the group’s portfolio. The group sought insolvency advice and Jon Roden, Rob Parker, and Helen Dale of Grant Thornton UK were appointed as joint administrators of CC Stim UK Topco Limited and six other companies within the Rekom Group on 1 February. 12 other companies within the group were unaffected by the administration.

Immediately on their appointment, the joint administrators completed a sale of the business and assets associated with 14 trading locations to a company controlled by the group’s co-founder Adam Falbert, as well as directors Vilhelm Hahn-Petersen and Russell Quelch. The consideration for the sale was £19.5m, and it allowed 498 jobs to be saved. The remaining 19 locations were closed immediately upon administration, with 464 employees being made redundant.

Secured creditor Axiom, which was owed £19.6 million on the date of appointment, received a fixed charge distribution of £19 million, leaving £600,000 (which is unlikely to be repaid) owing. No distributions are expected for ordinary preferential creditors, secondary preferential creditors or unsecured creditors.

The administrators have been assisted by Freeths and Hilco. Their proposals can be found HERE.