Dylan McGrath’s Fade Street Social is expected to survive following a “competitive bidding process”, despite Revenue demanding €1.7 million from the “insolvent” business just six days before a petition to put the business into examinership.
Earlier this week, Dessie Morrow of Azets Ireland was appointed as an examiner over Prime Steak Restaurant 2012 Limited, which trades as Fade Street Social.
The examinership petition said that should an examiner not be appointed, “the company will have to go into liquidation” and its 86 employees “will lose their jobs”.
In an affidavit, McGrath said he is “anxious” for an examiner to be put in place to “reassure staff”.
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There were six major issues facing Fade Street Social which were blamed by the petitioners including rising supply costs combined with the cost of living crisis’ impact on the hospitality sector, the increase in the VAT rate, and the Covid-19 pandemic.
The petition noted the impact of increased rental obligations caused by the sale of its premises by a related party in an attempt to reduce its overall liabilities.
Increasing labour costs which the company says “resulted in additional labour costs amounting to €171,902″ and was as a “direct result of the increase in the minimum wage” also hit the business. A restructuring of the company ultimately reduced its overall employee cost through a “significant reduction in hours worked”.
One of the primary concerns for the business, however, was loans to other companies owned by Mr McGrath. Shelbourne Social Limited, the entity behind the Shelbourne Social, owed the company in excess of €1.39 million when it was wound up in September 2022.
Loans to the entities behind Rustic Stone and Brasserie Sixty6 respectively were written off when they went through administrative rescue processes.
The company availed of a debt warehousing facility afforded to it by the Revenue Commissioners, which alleviated some of the company’s cash flow issues but ultimately, as the debt built up, the company was unable to fulfil its current and warehoused obligations.
In total the debt to Revenue stands at €1.74 million, with a “very significant” amount of this debt being leftover warehoused tax. VAT payments from 2020 through to 2025 are owed – nearly €1.2 million – alongside PAYE and PRSI payments of just under €550,000.
A 21-day letter of demand for tax, plus interest, was issued to the company just 6 days before it filed for examinership.
An independent expert report noted that the company may indeed owe more money to Revenue. The company had attempted to obtain additional investment in a bid to allow it to restructure and pay its debts.
Among those close to the company, it is believed to have a good chance of survival, with recent profitability – prior to exceptional losses relating to intercompany loans – and recurring business in a popular area of town.
An independent examiner’s report noted the company had made a “significant recovery” in turnover post-pandemic, with revenue returning from €1.47 million in the year ending June 2021, to more than €5 million in each of the past two financial periods. Turnover, however, remains below pre-pandemic levels.
