Houst has agreed to a Restructuring Plan to continue its post-Covid recovery [Credit: Houst]

Houst avoids administration through Restructuring Plan

UK: London-based managed flexible lettings platform Houst has avoided administration after reaching an agreement on a High Court-sanctioned Restructuring Plan.

In an update issued to investors on Seedrs, the company said that it was the first SME [small- and medium-sized enterprise] to pursue a Restructuring Plan. Houst decided to pursue the Plan in January after working with advisers at Begbies Traynor to develop alternatives to entering administration.

Founder James Jenkins-Yates reached out to existing investors, including Seedrs, to ascertain demand for a Restructuring Plan. Seedrs decided to abstain from voting on the plan, which was unanimously approved by voting shareholders and by the court.

The Restructuring Plan allows Houst to reduce significant liabilities of around £9 million that were accrued during the pandemic and the company is raising a round exclusively for existing investors, including those on Seedrs.

Citing the “unanticipated” global pandemic and the impact on the travel and hospitality sectors, which reduced the company’s revenue by over 90 per cent, Houst said that it had taken a number of “tough” decisions to ensure the future viability of the business, including “dramatically” cutting costs, leaving its office, furloughing all UK staff, moving customer support to a more cost-effective location and “significantly” cutting all expenditures.

At the start of 2020, Houst raised venture debt of £2.5 million from Virgin Money before acquiring the assets of its property management competitor in London, Hostmaker, which went out of business that March. Houst claimed that the acquisition had strengthened its dominant position across Europe, and it then forecasted profitability for 2020 and each year beyond that.

Since then, the company revealed that it had shifted pricing from a market share acquisition strategy to a more sustainable model, significantly increasing revenue per home. Despite closing a £2.6 million Future Fund Convertible Note Round, it was not enough to see Houst through the pandemic without further support, leaving over £10 million of liabilities that it was not able to meet.

The Restructuring Plan, which enables Houst to avoid administration, reduces the company’s liability to creditors depending on their status and raises a minimum of £500,000 [and maximum of £750,000 at a price per share of £0.0229] from existing shareholders. £250,000 is being used to finalise a repayment to Virgin Money, which will no longer allow Houst to defer payments of its loan.

The Plan was introduced as part of emergency measures brought in at the outset of the pandemic in the Corporate Insolvency and Governance Act 2020 [a new Part 26A in the Companies Act 2006]. It enables a company to compromise creditors to ensure the survival of the business while leaving the management team in place and without an insolvency event.

It has also introduced a new class provision that enables a company to bind dissenting classes of creditors under a Restructuring Plan, provided at least one class approves the Plan by at least 75 per cent by value of those present and voting.

Speaking to STRz about becoming the first SME to pursue the Restructuring Plan, Houst founder and CEO, James Jenkins-Yates, said: “We were the perfect example of a company that should use this legislation because we were acutely affected [like many] by Covid but have recovered nicely.”

Houst said that it was now working to change its operational setup to provide an improved service and increase revenue per booking to a more sustainable level.

The company revealed that increasing revenue resulted in its first-ever profitable month in June 2022, achieving £105,000 EBITDA, and expects this to remain the case for the rest of the summer, leaving a cash buffer to break even in the winter.

Houst dropped its previous brand name of Airsorted in January 2020 to recognise the growing number of platforms catering to short- and mid-term lettings for their properties. It came at a time when Airbnb was reported to have put pressure on companies to drop “Air” from their company names in case of any confusion differentiating between the brands.

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