21 Sep Restructuring a Restaurant with 29 Employees and $795,000 in Debt
Capability: Restructuring & Turnaround
Industry: Hospitality / Restaurants
Appointment: Small Business Restructuring (SBR)
Overview
The company operates a restaurant with 29 employees across full-time, part-time and casual roles. COVID-19 significantly affected the business, causing labour shortages, higher labour and material costs and reduced dine-in revenue. The resulting cash flow pressure also affected the company’s ability to keep its ATO liabilities up to date.
Challenges
- Trading losses across the two financial years leading up to the restructuring date
- About $715,000 owed to the ATO
- About $79,000 owed to other unsecured creditors
- Total debt of about $795,000
What is small business restructuring?
Small business restructuring lets an eligible company keep trading under the control of its directors while it proposes a plan to pay creditors part of what they are owed. If creditors accept the plan and the company completes it, the balance of the admitted debts is released. The ATO explains its approach to small business restructuring, and ASIC sets out small business restructuring and the restructuring plan for directors.
Greengate Advisory’s approach
We reviewed the company’s trading position and worked with the director on a restructuring plan the business could fund from its ongoing trading, then put that plan to creditors.
The restructuring plan
- 24 monthly contributions of $7,500
- The plan was accepted by the ATO and the other unsecured creditors
Outcome
- Debt reduced from about $795,000 to about $179,000, a reduction of about 78 per cent
- A return to creditors under the plan of 22.45 cents in the dollar
How Greengate Advisory can help
If your hospitality business has fallen behind with the ATO but is still viable, small business restructuring may allow it to keep trading while it deals with the debt. Outcomes depend on the circumstances of each business and on creditors accepting the plan. Read our small business restructuring guide or contact us for a confidential discussion. We can explain the options in English, Mandarin or Korean.
