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Madame Tussauds owner hit with winding up petition in dispute over debt

·4-min read
Members of the Royal Family at Madame Tussauds in London - Victoria Jones/PA Wire
Members of the Royal Family at Madame Tussauds in London - Victoria Jones/PA Wire

UPDATE: Since publication of this article the winding up petition has been withdrawn

The owner of Madame Tussauds has been hit with a winding up petition by Experian as the leisure operator seeks to bounce back from the upheaval of pandemic lockdowns.

Merlin Entertainments – which also runs Alton Towers, Warwick Castle and Legoland Windsor – is facing the threat of legal proceedings from Experian, a FTSE 100 listed data company, amid a dispute over a debt.

A spokesman for Merlin branded Experian's actions "wholly inappropriate" and said the company will apply to have the petition thrown out.

The spokesman said: “Experian’s claim, regarding a very small debt, is completely disputed, and as such a winding up petition for our subsidiary is wholly inappropriate. We will be applying to set the petition aside.

"Merlin Entertainments has a 20-year track record as a highly cash generative company, and supportive owners. Our 2021 audited accounts show a strong recovery from the pandemic."

It is understood Merlin has been in talks with Experian over the debt. Experian declined to comment.

The petition has been served on Merlin Attractions Operations Limited after the group suffered a spate of senior resignations earlier in the year.

Nick Varney, who was Merlin's chief executive for more than two decades, resigned at the end of April alongside his chief development officer Mark Fisher.

Merlin was bought by a consortium of investors led by Lego billionaire Kjeld Kirk Kristiansen in 2019.

Mr Kristiansen's family vehicle Kirkbi joined forces with investment giant Blackstone and the Canadian pension fund CPPIB to buy Merlin in a £6bn deal.

Merlin Entertainments was formed in 1999 following the £47m management buyout of Vardon Entertainments, led by Mr Varney. The company has now expanded globally and operates six holiday villages, 23 hotels and 140 attractions, including British theme park Alton Towers.

Merlin, which employs 28,000 people according to its website, came under intense scrutiny in 2016 when it was fined £5m over a roller-coaster crash at Alton Towers that seriously injured five visitors.

The company's operations have been upended in more recent years as it was forced to shut its tourist attractions because of lockdowns.

The leisure operator tapped up investors for €500m (£421m) with a bond issuance in the early stages of the and its total debt pile now stands at around £5bn.

Merlin's auditors issued a warning about the company's finances two years ago. KPMG said at the time that the financial statements of Merlin’s parent company Motion JVCO limited contained a “material uncertainty in relation to going concern” that “may cast significant doubt” on the company’s future.

However, EY has since been appointed as Merlin's auditor and declared it was appropriate to designate the company as a going concern in its 2021 annual accounts.

Winding up petitions can ultimately lead to the liquidation of a company if the debt is not paid. However, they are also frequently used as a tactic in a dispute where liquidation is unlikely.

Supplier disputes are expected to pick up pace when the country enters recession as cash-strapped firms demand payments for goods.

Corporate insolvencies have hit the highest level in at least 60 years as companies struggle with the increasing costs of labour and a rise in energy prices.

The government's Insolvency Service reported an 81pc increase in company insolvencies for the three months ended 30 June.

Allan Kelly, a restructuring adviser at FRP Advisory, said: "The coronavirus put a blocker on winding-up petitions but we are seeing them now, and there is starting to be an increase with creditors taking action to recover debts.

"Given where some businesses are and supply chain cycles, and as businesses become more capital constrained, and producing less profits due to the increased cost of living and operating, then they will try to collect cash more aggressively in some circumstances.

"Sometimes, it could be a disputed debt and the judge kicks out the winding up petition because the debt is disputed. Alternatively, it could just be an administrative error and whoever internally who should have been paying has missed it, so mistakes can happen."