LORD BILIMORIA likes to tell war stories from the early days of Cobra, the beer that has become a staple in Britain’s curry houses.

After this weekend, there may be plenty of his suppliers sick of hearing such tales after a deal that has left them an estimated £75m out of pocket.

On Friday, Cobra went through a so-called prepack administration. The business was acquired by Molson Coors, maker of Carling lager, in a joint venture with Bilimoria.

The deal means, however, that unsecured creditors, who are owed up to £75m, will get nothing.

The first bottles of Cobra went on sale in 1989 and the business has retail sales today of £177m. But despite its rapid growth, the company is yet to make a profit. In the year to July 2007, the latest for which accounts are publicly available, Cobra lost £13m.

In a bull market, the business could afford to concentrate on sales growth but the changing economic climate meant that Bilimoria had to rethink the strategy. Last November, he began trying to sell the business, as it had become clear Cobra would need to be part of a larger group if it was to continue to grow.

Unfortunately, most of the big brewers were either unwilling or unable to pursue a takeover and other options had to be considered as Cobra was in danger of running out of funds.

On Friday, the business was placed in administration before being instantly bought out by the joint venture. Molson Coors paid £14m for its 50.1% share in the vehicle.

Bilimoria said: “We had no choice but to go down this route. I feel terrible about that. I feel gutted that the unsecured creditors aren’t going to be able to be paid.”

Bilimoria said he fought hard to avoid this. He called in Price Waterhouse Coopers, the accountant, in the spring to work on a company voluntary arrangement (CVA) after it became apparent that a straightforward sale was not going to be possible.

Costs were cut and four directors stood down, including Adrian McKeown, the chief executive. Since last autumn, staff numbers have been cut from 150 to 50.

The CVA would have given all creditors some money back but the deal fell apart at the last minute after one creditor, Wells & Young’s, which brews Cobra under licence, vetoed the proposal. The brewer, which declined to comment, was advised by its credit insurer not to accept the deal.

Once the CVA broke down, a prepack administration became the only option. The prepack will see secured creditors, largely banks – which are collectively owed about £20m – paid back in full.

To some extent, Bilimoria, one of Labour’s favourite businessmen, has been unlucky. By the time he started looking for a buyer, most obvious bidders – such as Heineken, Carlsberg and InBev – were digesting earlier acquisitions.

The banking crisis has made it all but impossible for many businesses, including Cobra, to secure fresh funding, while the credit squeeze prevented a sale to a private-equity firm.

Questions may be asked, though, of a business strategy that has resolutely focused on growing sales rather than concentrating on the bottom line. Cobra has spent about £40m on marketing since its launch in 1990 and was reportedly budgeting to be loss-making for the next three years.

Despite its problems, Cobra has defied the malaise in the beer industry. In the year to date, it has grown 20% year-on-year in a falling market. Observers suggest that Molson Coors has landed a fantastic deal. For the unsecured creditors, however, it will leave a bitter taste.

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