Hospitality

01 October 2021The High Court has dismissed an application by a landlord creditor to overturn a company voluntary arrangement (CVA) implemented by coffee shop chain Caffé Nero. The CVA, previously approved by its creditors, compromised rent arrears and reduced future rents for the company's premises. The decision follows a series of previous high-profile challenges to retail and leisure CVAs.22 July 2021Young, one of the Caffe Nero's landlords has challenged the CVA in court.Marking the start of a four-day trial, the company said that Young, has no right to bring the challenge due to an arrangement he has with EG Group Ltd. EG is run by Mohsin and Zuber Issa, billionaire brothers who launched a takeover bid for Nero on the eve of the CVA vote.04 January 2021Some landlords, including Lord Sugar, are seeking to challenge Caffe Nero's CVA. The chain had proposed landlords receive 30p for every £1 of rent they are owed, and was seeking to move most stores to a turnover-rent based model. If there are any closures these are expected to be minimal.13 November 2020Last night coffee chain, Caffe Nero put itself into a company voluntary arrangement.Founder, Gerry Ford, explained that this was due to the second lockdown which has caused the chain to suffer, from limits to socialising, less shoppers in town centres and workers being told to work from home.KPMG are working with the company on this insolvency procedure. The CVA needs to be backed by landlords and creditors to be successful.The hope is that from doing this, rent negotiations can be made with landlords, so costs can be reduced and the company can be in a better position to rebuild itself post-pandemic.The chain employs more than 6,000 people across its 800 UK stores. Any job losses or store closures are unknown as of yet.6 November 2020A group of Lenders to Caffe Nero have been reported to of drafted in FTI Consulting.The financial advisers have been brought in by Alcentra and Partners Group, in preparation for the launch of a restructuring deal, involving a CVA, which could result in permanent store closures and job losses.23 October 2020Caffe Nero becomes the latest big name to look into a company voluntary arrangement.The insolvency mechanism is being considered since the coffee shop operator has been hit from coronavirus, alike many other high street hospitality businesses. It needs to restructure its financial liabilities, reduce its rent bill and exit loss making outlets.Details concerning the amount of shop closures or job losses are so far unclear.KPMG are working with Caffe Nero on its options.As it stands current, it operates from 660 UK stores, of which more than 90% have opened since the UK-wide lockdown ended in June and employs 5,000 staff.

I recently read an article in The Caterer , indicating that Prezzo is doing the right thing regarding its CVA being approved by its creditors - Their losses have been halved.It left me thinking, what should directors do once a CVA has been approved?  Well, quite frankly, they should follow Prezzo's example.  Yes, Prezzo is a big chain of restaurants but, what the directors are doing, in reality, any director can do in some form or another.  So, what is it that is being done?  In my view there are 3 fundamental things:Change Change ChangeOk, that is a bit flippant but lets look at it more closely.After the CVA was agreed Prezzo changed the management team by appointing Executive Chairwoman, Karen Jones. In small businesses it may not be that easy to change in this way, but management really should consider changing their structure.  Perhaps responsiblities could change, maybe someone should be let go or even promoted? Change the strategy or focus on fundamentals. Karen Jones said the company was now focused on ensuring customers left wanting to return after a period where a “strategy of new openings and new concepts distracted from its mission of hospitality”.  In hindsight that seems so obvious, a returning customer is worth so much more as you do not have to spend loads of money to get them back. Change your financial controls. The company's directors will need advance notice of any problems and the rigour of the process means that they must have good management information.  Poor financial records is the principal reason that companies become insolvent.Investing in the future is the next big thing.  Finding new money to carry out change can be a challenge.  Debt for equity swaps can work in larger businesses where the lenders see an opportunity down the road. Debt relief can increase working capital by improving cashflow.  In smaller businesses, creditors like to see that directors and stakeholders are putting money in.  So, maybe sell some assets or try to raise other sources of finance.  Lenders will lend to companies in a CVA as long as they are happy that the changes mentioned above are happening and any forecast is realistic.If you want to know how we can help businesses then give us a call on  0800 970539