Equistone-backed Gaucho appoints Deloitte as administrator

The development comes two and a half years after the GP reacquired the company with capital drawn from its €2bn fifth fund in a deal believed to have been worth around £100m.

It puts 1,500 jobs at the group at risk, according to various media reports, and is the latest sign of the troubles facing the UK casual dining sector. The challenges have regularly been attributed to oversupply in the segment, post-Brexit-vote devaluation in sterling, an increase in business rates, and the introduction of the national living wage.

According to publicly available documents, Gaucho's holding company reported adjusted EBITDA of £8m in 2016 – the most recent period for which results are available – from a turnover of £83.1m. However, it also reported a loss after tax of £13.4m in the same year.

It is understood that Equistone presented Gaucho's lenders with solvency proposals for the group on a number of occasions, which would have seen the GP continue to fund the company. The proposals included a company voluntary agreement (CVA) for the group's Cau chain and the acquisition of existing lenders' debt positions. However, a recent report by Sky News indicated that neither the Equistone proposal – nor three alternatives put forward by Osmond Capital, Core Capital and Limerston Capital – came close to matching the £50m owed by Gaucho to its lenders.

Unquote understands the group's lenders rejected Equistone's proposal in May and directed management to appoint KPMG as advisers to initiate and run an options process.

Following unsuccessful efforts to sell Gaucho's assets through a pre-pack administration and the threat of a winding-up petition from HMRC, it is understood that Equistone made further offers for the company. These involved future funding, a CVA for Cau and the acquisition of the company's debt. The first of these were rejected on the basis of deal structuring, Unquote understands, while the final Equistone offer was rejected on the basis that the price offered was too low.

A spokesperson for Equistone said: "Equistone has been a supportive majority shareholder to Gaucho Group since its investment in 2016, working closely with the company to address the challenges presented by the adverse trading conditions that have negatively impacted the UK casual dining sector as a whole. Despite Equistone having presented Gaucho's lenders with, and committed to funding, a business plan that would have maintained the company as a going concern, we understand that a notice of intention to appoint administrators has been submitted."

Under Equistone's tenure, the group increased its number of Gaucho restaurants from 17 to 19 and its number of Cau restaurants from 17 to 22. Despite wider media reports that the Cau brand was rolled out too quickly, Unquote understands Equistone regularly reviewed the pace of the company's expansion programme throughout its holding period.

Previous funding
Gaucho first received private equity backing in 2005 when Equistone (then Barclays Private Equity) backed the restaurant operator's £23.5m management buyout. The firm sold its 47% holding to Phoenix Equity Partners the following year via a £55m secondary buyout.

ICG then supported the third management buyout of Gaucho in 2007, in a deal understood to be worth £120m. It sold the business to Equistone in January 2016, having initially made a partial exit via a £37m refinancing deal in 2014.

Company
Founded in 1976, Gaucho is a steak house group that operates under the Gaucho and Cau brands. There are 16 Gaucho branded restaurants across the UK with three additional sites in Buenos Aires, Dubai and Hong Kong. Cau operates 21 restaurants in the UK, with an additional site in Amsterdam.

People
Gaucho – Oliver Meakin (CEO).

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