The founder of Cobra Beer today claimed he was forced to give up “a car and a driver” following a rescue deal that left creditors owed £71 million.
In an interview a national newspaper, Lord (Karan) Bilimoria insisted he had suffered a personal financial blow as he sought to defend the group’s controversial “pre-pack” administration arrangement.
The entrepreneur, who helped buy the firm out of administration earlier this year, said he was “now earning a fraction” of his former salary.
“I had a car and a driver, but I no longer have that. Now I drive a 13-year-old Mercedes Coupe that has done over 100,000 miles,” he told the newspaper.
The firm’s rescue caused a furore when it was revealed that Lord Bilimoria and investment associates secured a 49.9% stake in the new firm - while he also retained his chairmanship - as unsecured creditors suffered mammoth losses.
But the group’s founder pledged to repay them some of the cash as he strives to get the business back on track with new partner Molson Coors.
He said in today’s interview: “Would my creditors have rather that I’d gone bust completely? Then they would have got nothing, everyone would have been wiped out ... the pre-pack was the least worst alternative.”
Pre-packs have come under heavy fire for allowing firms to fall into administration before being bought back immediately - often by existing management - enabling directors to cut loose from debts and losses.
Corporate failure experts suggest these swift sales can help salvage businesses by preventing the reputational damage inflicted on brands during drawn-out administrations, while also giving greater hope of repayment deals for suppliers.
Lord Bilimoria said the deal had enabled the survival of the Cobra Beer brand, adding he would now look to settle with creditors.
“They will be paid off over time, but it may not be the full amount. It will be whatever each person us happy with and is settled with,” he said.
He also claimed to have taken out an £18 million personal loan to help fund expansion plans before the firm’s troubles hit.
He said in November last year he would either have to sell the business or find a strategic partner after a plan to sell a stake to drinks giant Diageo fell through.
Lord Bilimoria set up the business in 1989 after graduating from Cambridge.
The beer was originally brewed in Bangalore and imported to the UK for the Indian restaurant market. The firm started brewing in the UK under licence in 1997.
It is now brewed in Burton in the Midlands where it makes products including Cobra Premium 5%, King Cobra and Cobra Light.
Cobra had been hoping to expand its presence in India with an original aim to capture a 10% share of the beer market there by 2012.
Lord Bilimoria developed a name as a successful entrepreneur through the fast growth of the Cobra brand in the early years. He was ranked in 694th place in this year’s Sunday Times Rich List, with a reported £80 million fortune, and had been appointed a “national champion” for entrepreneurship by Gordon Brown during his tenure as Chancellor.