Anglo Irish Bank has been saddled with a heavy exposure to the troubled Little Chef roadside restaurant chain in Britain, which was pulled back from the brink of collapse last week in a £10 million (€14.87 million) fire sale.
The rescue by Israeli group Arazim Investments and distressed asset specialist RCapital came less than a year after the Irish bank financed Arazim's £60.3 million acquisition of the 65 freehold sites in Little Chef's portfolio of 230 restaurants.
Arazim's desire to protect that investment and its relationship with Anglo's British unit are said to have been the prime motivations behind its rescue attempt with RCapital.
The Israeli group is believed to have provided at least £5 million for the rescue package finalised last Wednesday, very soon after PricewaterhouseCoopers (PwC) was appointed administrator of the chain. The latest contribution from Arazim was not financed by Anglo, it is understood.
While there was no comment yesterday from Anglo, the bank's exposure to Little Chef is understood to be fully secured on the freehold assets that were bought out by Arazim in the deal it financed 11 months ago.
Anglo first had an involvement in Little Chef in October 2005 when it provided a £39 million loan to businessmen Lawrence Wosskow and Simon Heath for the £52 million buyout of the chain by their Peoples' Restaurant Group.
This loan was discharged some time after Arazim bought the freehold sites in the Anglo-financed sale-and-leaseback deal it made with Peoples' Restaurant Group last February.
Some local reports suggest that a number of these sites were among the worst performers in the group.
Rent commitments under the leaseback arrangement were a big factor in the chain's financial losses and its rapid decline into administration.
Little Chef auditor KPMG had been hired to restructure the business last October when it became clear that the chain could not pay the rent, but no buyer emerged at that stage.
Some 500 people will lose their jobs in a rescue package which will save 193 of the chain's 230 outlets. Arazim and RCapital will continue to operate Arazim's 65 freehold sites and another 128 owned by Travelodge.
The owner before Peoples' Restaurant Group was private equity firm Permiria, which paid Compass group £712 million for Little Chef and the Travelodge chain. It sold Little Chef to Peoples' group and Travelodge to Dubai Capital International.
Established in 1958 and famous for its "Olympic" fry-up breakfast, the chain was for many years the best-known food brand on British roads. However, the business failed to modernise.
The Little Chef brand suffered badly in recent years as motorists turned to healthier food and new-style service stations which have their own food offerings.
The chain still claims to serve 20 million meals a year, but the latest rescue attempt comes only three years after an effort to rebrand its "Fat Charlie" logo in with slimmer version of the chef met with customer resistance.
