Chilango raises £3.7m from oversubscribed mini-bond

By Roger Baird on 16th April 2019

Alternative Credit

The Mexican restaurant chain said it will use the cash to build more restaurants and refinance existing debt.

Chilango raises £3.7m from oversubscribed mini-bond

Mexican restaurant chain Chilango has successfully closed its second mini-bond, amid intense scrutiny surrounding the financial product.

The London-based business raised £3.7m from almost 800 retail investors after closing what it calls its Burrito Bond 2, topping the £2.1m it raised from its first such bond in 2014.

The company, founded 12 years ago, planned to raise £1m from its four-year mini-bond offering eight per cent to investors when it launched in October. However, due to investor interest it raised its target and extended the cash call several times before finally closing take up for oversubscribed bond on 12 April.

Mini-bond concern

The move by the mid-market dining chain, with 11 outlets, comes amid concern by MPs and regulators about whether the risks attached to mini-bonds are understood by small investors.

Earlier this month, watchdog the Financial Conduct Authority (FCA) said it would look into “whether the existing regulatory system adequately protects retail purchasers of mini-bonds from unacceptable levels of harm.”    

It was urged to do so by Treasury Select Committee chairman Nicky Morgan, following the January collapse of investment firm London Capital & Finance (LC&F), which left 11,500 small investors facing 80 per cent losses on the £236m they invested with the firm, which marketed unregulated mini-bonds as regulated ISAs.

However, Chilango said it had “received a steady stream of requests to offer another bond” from investors since it offered its first one five years ago.

The minimum investment in the second bond is £500, with 194 backers qualifying for a premium black card entitling them to a free weekly burrito meal for the lifetime of the loan after investing more than £10,000.

Key backers

Notable backers include former Domino’s Pizza UK chief executive Chris Moore, former McDonald’s UK marketing vice-president Laurie Morgan and former Itsu managing director David Haimes. Chilango said it will use the cash to open new outlets, which cost around £500,000 per restaurant. It will also refinance existing debt.

The business was founded in 2007 by two former Skye employees Eric Partaker and Dan Houghton, who opened their first outlet in Upper Street, north London. The majority of its restaurants are in the capital, with a single outlet in Manchester.

Co-chief executive Partaker (pictured, right) said: “The response to the Burrito Bond 2 offer has been overwhelming and bears testament to the public’s enthusiasm for our mission – to inject a little flavour and vibrancy into the largely bland high-street dining landscape.”

Last year the firm’s restaurants posted a £1.7m ebitda profit on £10.3m sales and £1.7m with 5.3 per cent like-for-like sales, it forecasts £2.1m ebitda profit and nearly £11m sales from its restaurants for the current financial year.

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