A week ago insolvency administrators Duff and Phelps published their latest progress report about the failed Dreamland Amusement Park operator, Sands Heritage Limited (SHL). It makes very interesting reading.
The most striking and worrying issue raised by the report is the administrators claim that it is “uncertain whether there will be sufficient realisations to enable a dividend to the non-preferential unsecured creditors of the Company (SHL)”. According to Duff and Phelps the non-preferential unsecured creditors are owed a staggering £5.79 million in unpaid bills. Lots of these creditors are small local businesses who provided goods and services to SHL and who can ill-afford to take even a small financial hit in these difficult times. This is not good news for the local economy.
Many people have argued that this unacceptable state of affairs is entirely the fault of SHL. It was SHL who was running the amusement park and taking the all operational decisions prior to its collapse into administration. It was SHL which had produced a business plan which proved to be wholly inadequate for the profitable running of the park and it was SHL who was behind the wheel when financial disaster struck. Whilst this is true, blame apportionment, especially for the failure of a large and complex project such Dreamland, is not that simple.
I have been arguing for a long time that although SHL may have been the author of its own downfall, the actions of Thanet District Council (TDC) were also likely to have been a contributory factor in the company’s collapse and the consequential £5.79 million debt mountain. My view is supported by SHL itself which in late 2015 is alleged to have threatened to take legal action against TDC for beach of contract which, SHL claimed, had caused it serious financial difficulties. SHL administrators, Duff and Phelps, repeated this claim in reports published on the Companies House website. To avoid an embarrassing court case which may have revealed the true extent of TDCs responsibility for SHLs financial difficulties, TDC made a payment of £950,000 to the company in late 2015. I have now submitted a Freedom of Information (FOI) request for the release of documents relating to the £950,000 payment, but TDC is claiming that these documents are commercially confidential and will not release them. I wonder what they are trying to hide?
But its not just TDCs alleged breach of contract which may have contributed to SHLs financial collapse. Questions have also been asked about whether TDC should have appointed the the company to run the amusement park in the first place. Less than 2 months before the park opened in June 2015 the Heritage Lottery Fund (HLF) a major co-funder (over £5million) of the Dreamland project wrote a strident letter to TDCs Chief Executive Madeline Homer and the then Labour Council Leader, Iris Johnston, expressing great concern at the appointment of SHL as the Dreamland Operator and demanding to know on what basis the decision was made and why HLF had not been consulted. In subsequent correspondence between TDC and HLF it emerged that TDC had taken external legal advice about the appointment of SHL, which serves to demonstrate a serious degree of unease about the council’s choice of operator.
More recently even TDCs own internal auditors have expressed reservations about the appointment of SHL as the Dreamland operator. In a report from December 2016 they say that “The learning from this, and experiences across the wider East Kent local government umbrella, is that fledgling companies with no track record or accounts, set up for a particular purpose carry a greater risk than is being acknowledged through the due diligence checks being undertaken by these multi-disciplinary groups of officers and members”. So there you have it, what many people believe to have been an unwise choice of park operator by TDC, coupled with alleged contractual failures by the Council, are likely to have been important factors in the collapse of SHL and the astronomic £5.79 million debts which are unlikely to ever be repaid.
I hope that my FOI requests, one of which will shortly be considered by the Information Tribunal in London, will eventually force the disclosure of documents which are likely to proove that TDC badly mismanaged the Dreamland project and that this mismanagement contributed towards the collapse of SHL and the consequent financial mess.
But its not all bad news! The Administrator’s report also includes some very positive information about Dreamland, especially the massive £20 million investment which the Cayman Islands registered hedge fund Arrowgrass Master Fund has made in the park and its surrounds. Having visited the park since its makeover, I must say I am impressed by what has been done. But I do wonder why Arrowgrass Master Fund has invested so much money in Dreamland and why, despite the failure of SHL to make the park a success, it believes it can generate a decent return for its rich investors. Clearly Arrowgrass has spotted what it believes to be potentially lucrative and highly profitable Dreamland related opportunities.
This probably explains why, according the Administrator’s report, Arrowgrass recently acquired almost 99% of SHLs shares from the original shareholders including Nick Connington, John Adams, Robert O’Connor, and Christopher Webster, who all resigned as directors of SHL in May this year.
SHL is now almost 100 percent owned by an offshore hedge fund based in the “tax-efficient”, or as some people might say “tax-dodging”, Cayman Islands. The questions must now be asked who are Arrowgrass and what are their plans for Dreamland? I will be discussing this in Part 2 of this post which I hope to publish soon.