Shepherd Cox Email
On 11th June 2020 Shepherd Cox sent out its latest email to investors in the six hotels which are now in administration. It was the same proposal that they tried to get investors to buy into before the court hearing at the end of May. Investors were not fooled by it then and they are not being fooled now.
The proposal in May was an attempt to stop the court hearing from taking place. This time it is an attempt to stop the investigation into their management of the companies and the conduct of the directors.
It was noticeable that the Shepherd Cox email was not sent to investors outside the UK. Investors outside the UK are the ones who did not get their rentals paid, whereas investors in the UK were being paid. That is very fishy in itself.
The administrator responded to the Shepherd Cox email. We have copied two of the claims made by Adam Stanborough of Shepherd Cox below, with the administrator’s response below them.
Shepherd Cox Email: ” a number of Shepherd Cox companies are also creditors of the companies in administration”.
Administrator Response: “Mr Stanborough provides no confirmation of the amounts which it is alleged other Shepherd Cox companies are owed. Since operation and up to the 30 March 2020, the hotels have reported cumulative losses of £3,178,460. However we consider that this does not fully represent the position. The companies have used accounting treatment on the sale of the rooms to investors which means they have recognised profit on the sale of those rooms. We are currently undertaking accounting analysis of the amounts which have been attributed to profit but we believe it will show that the hotels have made significantly more losses (and have never been profitable as a trading business under the management of the Shepherd Cox Group).
The money raised from investors in the six companies is circa £17,000,000 and in addition, the Companies have third party unsecured loans totalling £1.9m. Please note that the vast majority of these funds have never been received by the Companies but have been paid into the wider Shepherd Cox Group.
That leaves just under £9m of money unaccounted for and seemingly being used to provide general funding to the Shepherd Cox Group.
The Companies have funded ongoing trading losses and rental payments by the funds received from investors, not the revenue from the trading of the hotel. The current evidence suggests that if the hotels were traded, they would not generate anywhere near sufficient funds to pay the costs of ongoing trading and make rental payments to investors”.
Shepherd Cox Email: “Whilst Shepherd Cox believe that the ‘share swap’ proposal represents the best way of securing the expected returns, creditors need to move quickly to organise themselves to unite the freehold with your leaseholds to enable the hotel to trade and generate income.
With that in mind, we are in the process of setting up 6 new companies (referred to below as the ‘OpCo’) that will attempt to recover each of the freeholds from the administrator in order to operate the hotel.
Providing the OpCo has your support this new company would then seek to recover the hotel freeholds from the administrator in order to have the right to operate the hotel on your behalf”.
Administrator Response: “What Shepherd Cox are proposing is that investors assist Shepherd Cox in trying to halt the Administration process. This might, they may think, avoid an investigation into what has happened to all the money that was paid for the rooms. We can confirm that the administrators (and any subsequently appointed liquidators) will be investigating the Companies affairs and the conduct of their management in this regard thoroughly in accordance with their statutory duties to creditors. We will be taking all actions necessary to recover monies and bring those responsible for any wrongdoing to account”.
We would welcome the Shepherd Cox Group submitting detailed business plans with financials which may be reviewed both by investors and their advisers and by the Administrators in this regard.
If any option from the wider Shepherd Cox group does represent the best position and they are also able to pay back the substantial funds which they owe to the Companies, then we would welcome their proposals”.
It is worth noting that in a previous email to the Shepherd Cox directors, the administrator offered to record the interview which they will be having with the directors so that it could be shared with the investors. The Shepherd Cox directors were asked to give their consent. As yet the directors have not agreed to that proposal.
Since our last article on this subject we have been looking at the accounts for some of the other Lee Bramzell and Nick Carlile companies filed at Companies House. We believe that at least another nine hotel companies can be regarded as balance sheet insolvent.
If anyone is still interested in investing with Lee Bramzell we’re sure he’ll be happy to take your money for his new ‘Festival Hotels’ brand.
Anyone who feels that Shepherd Cox director Nick Carlile is in any way qualified as either a property or a business expert can contact him through his own self-publicising website nickcarlile.com. Maybe he could do one of his famous podcasts, but this time explaining how he and his mates made £9m of investors’ money disappear. There are 235 investors who would be sure to tune in to that one.
To read our previous article on Shepherd Cox please click here.
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