Collapsed nightclub The Lofts was trading at a loss on a weekly basis after being launched with a loan from a firm owned by director John Dance, documents show.
Superclub and pub destination The Lofts and The Hustle closed in Newcastle city centre in May after becoming embroiled in an FCA investigation into a separate company owned by one of its directors, John Dance. Mr Dance had joined the company behind the leisure venues – Dead Vibey Ltd – alongside co-founders Rob Seaman and Martin Smith, which was incorporated in September 2018 and started trading in the former Tiger Tiger building in August 2021.
Time was called on the two venues two months ago, following the appointment of business restructuring specialists at FRP Advisory as administrators on May 15, and it emerged last week that the firm had creditor claims topping £7m. The move came as WealthTek LLP – which trades as WealthTek, Vertem Asset Management and Malloch Melville – a company founded by Mr Dance, was ordered to cease operations by the FCA amid “serious regulatory and operational issues”.
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Administrators working on the wealth management firm WealthTek LLP have found a potential £81.4m shortfall in client money and Mr Dance has seen assets worth £40m frozen. Joint administrators of Dead Vibey Ltd, Steven Ross and Allan Kelly, have now published their proposals, detailing how the business was bankrolled by a £7m loan a firm owned Mr Dance – backing which was lost when an investigation was launched into his other business ventures.
The administrators say the company can’t be rescued as a going concern because it had ceased trading, laying off all 81 staff, two weeks before their appointment, but efforts are being made to find buyers for the business and its assets. The administrators propose moving the company towards a creditor’s voluntary liquidation, which would enable them to distribute some of the money owed to unsecured creditors.
The FRP specialists haven’t received copies of accounts for the company, but extracts from financial statements show that the firm posted a £1.127m loss in its 2021 financial year.
The document says: “The company was initially funded by a loan of circa £7m from Collingwood Wealth LLP which is another business venture of John Dance’s. Significant investment was made into renovating the company’s leasehold premises including a considerable spend on market leading audio-visual equipment.
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“Trading losses were incurred on a weekly basis while the directors sought to establish the business. The company’s lost its financial support as a result of the financial irregularities and FCA investigation of Mr Dance’s other business ventures. The administrators commenced a marketing exercise to market the business and/or assets for sale. We received a large amount of initial interest in the opportunity and various parties visited the premises.
“Most parties were interested in acquiring the lease and assets; however, they considered the rent and service charge was too high. We are aware that various parties contacted the landlord directly in an attempt to agree a rent concession but to the best of knowledge, no agreements have been reached.
“The company has spent a significant value on the refurbishment of the premises. However, given the nature of the investment and the lack of interest in acquiring the lease we do not anticipate any realisations in this regard.”
So far, administrators have sold the company’s fixtures and fittings for £16,500 plus VAT and have received an offer of £234,000 plus VAT for the audio-visual equipment. Overall, they estimate they will bring in £348,380 from the firm’s assets – but claims total more than £7m, leaving a shortfall of £7.4m.