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Companies linked to the Dears Healthcare Group entered administration after Metro Bank withdrew support following a breach of its facility agreement with one of them, a new report has alleged.

Scotpharm (MNA) Limited and MSLNA Limited, the holding companies for subsidiaries comprising Dears Pharmacy branches in Edinburgh and Fife, both entered administration on September 7.

Administrators from business advisory firm BDO said in reports published this week that by May this year, the existence of cash flow difficulties at both entities had become apparent to Metro Bank, as well as to other Dears Healthcare Group members.

A subsequent review revealed that Scotpharm subsidiary Barrie Dear Limited (BDL) had secured an invoice discounting facility with RxBridge, which was in breach of its facility agreement with Metro Bank.

It also revealed that accounts had been opened with two other banks without Metro Bank’s knowledge, which was also in breach of the agreement.

The bank withdrew support for the Dears Healthcare Group entities and issued a formal demand for repayment of an outstanding overdraft granted to BDL and loans to both BDL and MSLNA.

When this demand was not satisfied, the bank took the decision to appoint administrators to Scotpharm and MSLNA.

Their subsidiary companies have not been placed into administration and their pharmacies, which collectively employ around 420 people, continue to trade as normal.

The administrators said they plan to preserve both companies as going concerns and return them to solvency, and to use proceeds from sales of some or all of their respective pharmacies to repay Metro Bank as well as unsecured creditors, including Scotpharm co-director Barrie Dear who is owed £6.5m.

In the interim, Metro Bank has provided an overdraft facility to Scotpharm while it is in administration to meet the “significant funding requirement” needed to continue trading.

Pharmacy Sales UK is handling the sale of the businesses on a phased basis, and began marketing four Scotpharm-owned pharmacies and four MSLNA-owned pharmacies shortly after administrators were appointed. Offers had been accepted on four of these as of October 29.

MSLNA is the holding company for trading subsidiaries LP16 and LP18, which comprise four and six branches of Dears Pharmacy respectively. It was established in November 2023 to facilitate the purchase of former LloydsPharmacy branches.

Scotpharm is the holding company for BDL, which comprises 12 pharmacies. It was established in 2017.

Collectively, the companies and their subsidiaries are referred to as the Dears Healthcare Group. Mr Mahyar and Mrs Sara Nickkho-Amiry are directors at both companies, with Mr Barrie and Mrs Lesley Dear acting as directors at Scotpharm only. Mr Nickkho-Amiry was in sole control of day-to-day operations at both companies, said the administrators.

Scotpharm and MSLNA have been approached for comment.

Related: Allcures puts 15 pharmacies into administration ahead of sale to London group