A UK-based Mexican restaurant chain that raised millions of pounds from small investors this year via a “burrito bond” scheme is in talks with restructuring experts about options for the business.
Chilango, which has 12 UK outlets, most of them in London, made headlines around the world in 2014 when it launched its version of the bond with its quirky name, and earlier this year announced it had pulled in £3.7m from hundreds of small investors who had signed up for “burrito bond 2”.
The Guardian was told that Damian Webb, a partner at accountancy firm RSM who specialises in restructuring, and has been involved with several high-profile companies in recent months, had been brought in by Chilango. Options could include administration or a company voluntary arrangement, a form of insolvency that is deal with creditors.
A statement sent to the Guardian by Webb at the RSM Restructuring advisory said: “Chilango has engaged RSM to assist on working on long-term planning, options and strategy. All further inquiries should be directed to the company.”
In October last year, Chilango launched the burrito bond 2, which promised returns of 8% a year. It said the money would be used to refinance existing debt and open new outlets.
Chilango’s parent company, the London-based Mucho Mas, made a loss of £1.4m in the year to 25 March 2018, the latest period for which accounts are available, and a loss of just under £3.2m the year before.
As of Wednesday, its finance arm, Chilango Bonds, was six weeks late with filing its accounts at Companies House.
Chilago’s chosen form of fundraising, known as a mini bond, allows a company to raise capital by borrowing directly from the public, and has proved popular with small investors desperate for better returns. Individuals receive a fixed interest rate and, when the bond matures, their capital is returned to them.
Many companies have issued them but this year the Financial Conduct Authority said mini bonds could be high risk, and there is no Financial Services compensation scheme protection if the company issuing the mini-bond fails.
In April Chilango said the burrito bond 2 had raised more than £3.7m, making it “one of the most popular alternative investment offers of recent times”. Nearly 800 investors put money in – including 194 who qualified for a Chilango black card entitling them to a free burrito every week for the lifetime of the bond after committing at least £10,000 each.
The company said the latest sum raised comfortably surpassed the £2.1m brought in by the original burrito bond in 2014, which was snapped up by more than 700 individuals and covered by publications such as the Wall Street Journal.
The latest investment is an unlisted corporate bond with a four-year term paying a fixed 8% a year interest.
At the time of the burrito bond 2 offer, Chilango’s website highlighted the risks – it said that in the event that Chilango Bonds or a member of its group became insolvent, “you may lose some or all of your investment … If you suffer a loss, you are not entitled to compensation from the Financial Services compensation scheme.”
Chilango, which opened its first restaurant in north London in 2007, has 10 outlets in the capital, plus one in Manchester and another in Birmingham.
Eric Partaker, Chilango’s chief executive and co-founder, said there was “nothing to report … We are working with RSM on some long-term business planning.”
