Burrito dining chain Chilango prepares to enter administration

Small investors who sank millions of pounds into a “burrito bond” scheme could lose most of their cash after the Chilango dining chain said it planned to call in administrators.

The collapse may lead to the closure of the group’s 12 Mexican-themed restaurants, with the potential loss of 152 jobs.

More than 1,000 investors bought £5.8m worth of mini-bonds in two fundraising efforts by Chilango, the most recent of which ended in April last year.

The scheme promised returns of 8% a year but in December Chilango warned investors it required a rescue restructure to cut rents and exit unwanted outlets.

Bond holders were given the chance to cash out or to convert their investments to preferential shares. It is understood that only about 20 cashed out and the process of conversion was not completed in the light of poor trading during the pandemic.

If Chilango goes into administration, the bond holders will be reliant on returns from the sale of its assets, which the company warned last year could lead to them losing 99% of their investment.

A string of casual dining chains including Pizza Express and Azzurri, the owner of Zizzi and Ask, are planning to close outlets. The sector was already suffering from rising costs and falling visitor numbers before the pandemic forced them to close outlets for weeks.

Chilango said it was looking for a buyer but had been hit hard by lockdown.

“No business could have foreseen the impact the coronavirus crisis would have on our industry, with few sectors being hit harder by the pandemic than hospitality,” the group said.

“During this period we have done our very best to mitigate the pandemic’s impact, operating as much as is safely possible while implementing the various government support measures available. Unfortunately, these efforts have not been sufficient to secure the future of our business.”

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