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Licensed Insolvency Practitioners With National Coverage

0800 9700539
07833 240747

What is a CVA (Company Voluntary Arrangement)?

Retailer rescue with CVA

in Retail What is a CVA (Company Voluntary Arrangement)?

Are you a retailer with serious financial problems? Have sales not recovered post pandemic? Do you have some poorly performing shop units and cannot get rid of the rent liabilities?Talk to us now about how we can help multiple retailers and other types of retail business restructure and cut loss making activity.We can determine lease obligations, remove staff at low cost and negotiate with your bank! Read our 69 page experts guide to CVAs.In the last couple of years many High Street names have failed.See a list here on the Centre for Retail Research website. or keep up to date with our news pages on companies that have gone bust.It seems too that when times get tough the marginal or secondary site stores suffer most, so how do you get rid of those?Without resorting to shareholders for capital or debt/bond facilities, many larger groups are entering protective insolvency, closing stores or trying to survive by restructuring.Fragility is the order of the day for undercapitalised companies. Having to meet bank covenants, rent quarter days and pay VAT /PAYE when due, are impossible juggling acts to achieve when making a loss.The increase in business rates, which many firms in built up cities are experiencing, due to Government changes, are also not helping. So how can RMT KSA help a retailer restructure? Where a retail group has a number of badly performing stores but the remainder are viable/profitable then it is enormously difficult to stop the haemorrhage of cash (even if the bad stores are shut down, rent and overheads are still payable). Normally a retailer can only hope that the landlord will let the company assign or surrender the lease, obviously the landlords business requires tenants paying rent, not empty properties. Too many vacant properties could mean that their business model is not viable.With the inherent power of the lease they will be very unlikely to allow surrender without a price being paid. Even assignment may lead to future problems if the assignee is not financially strong.With use of a company voluntary arrangement (CVA) we have assisted companies with exiting their non performing properties and shopping centres. Additionally, we have helped terminate formal leases, therefore crystallizing the liability. Rent payments are terminated and landlords are prevented from taking recovery action. Often, we are asked - how can this approach work? It is essential that the proposals are cogently structured and careful financial forecasts are formulated in support of the CVA proposal. Following this, detailed negotiations must begin with landlords to seek surrender or termination of the lease. If this is not forthcoming then the company should consider exiting the property before the CVA proposal is published and finalized.RMT KSA helps our clients with deal structure, turnaround management, building the proposals and forecasts, driving the deal with creditors and helping the board through the crisis.Be aware that it is not usually necessary for Administration or Receivership to be used for this approach! Therefore it is cost effective and powerful with minimal cashflow consequences. Stock and fixtures (as long as not landlords improvements) can be used elsewhere in profitable stores.Talk to us now, call Iain Campbell or Keith Steven for more details: 0800 9700539Want to know more about KSA Group?See here for client case studies. See our testimonials page for what our clients say about us.Retailer CVA Case StudiesMidlands: £1m sales Bathroom and Kitchen Products London based Multiple Furniture and Design RetailerOur furniture and design retailer client successfully exited their CVA in 2017. Below outlines a brief overview of its profit and loss account:  "Keith - we will gladly give anyone a glowing reference for KSA Group, what you achieved for our company was excellent. Now we are away from the high rent mall shops, our factory shops are doing really well. Without your help in re-organising the company's store mix and debt, I know that we would have gone into liquidation" A quote from the managing director of a mid sized fashion chain with high street, mall and factory outlets, we closed all the non performing stores and helped him save his company. He will vouch for KSA Group's work, why not give us a call now? 0800 9700539

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Retailer rescue with CVA

Caffe Nero CVA Challenge Fails

in Hospitality News What is a CVA (Company Voluntary Arrangement)?

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.

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Caffe Nero CVA Challenge Fails
high street

CVA Advice For Landlords

in Property and Real Estate What is a CVA (Company Voluntary Arrangement)?

Landlord affected by CVA – Should I Vote For Or Against? Should I Even Vote? High street names, once bastions of the High Street are using company voluntary arrangements to restructure their leases, to cut costs during the pandemic. But is this fair? Should I vote? These are just some of the questions we are being asked daily as CVA experts. Keith Steven has experience of dealing with over 500 CVA cases in 25 years, so he knows a thing or two about turnaround. We asked him to answer these frequently asked questions…..CVA Debate on the 7th November reviewed Q1 As a landlord should we vote? You are not obliged to vote as a creditor in a company voluntary arrangement. The CVA voting process is entirely optional. However, I believe it is important for all creditors and stakeholders to take part in what is an equitable process set out by the 1986 Insolvency Act. Yes, CVAs have been part of UK law since 1986.If you don’t vote at all, then your vote will be deemed to be in support of the CVA because it is not a vote against.  Is that the impression you want to give as a landlord? By abstaining you don’t really influence the vote against.So, we would always recommend carefully reading the proposals put forward to you by the CVA nominee and question the nominees or indeed the company proposing the CVA on the terms of the CVA proposals. Not many creditors are aware that they can put forward modifications to change the proposal.If for example a CVA does not include an element of your debt, you can modify the CVA by proposing modifications. For this to have any bearing on the CVA decision making process you would have to have more than 25% of the overall votes cast. Question 2: As landlords should we vote for or against a CVA put forward by the tenant? That is a decision to be made on a purely commercial basis. It may depend on the proposal’s terms to deal with YOUR property and the properties and unsecured debts of other stakeholders. At this moment in time many ‘High Street’ CVAs are predicated on dealing only with the landlords’ leases for their so called dark stress (failing outlets).  My view is it is not equitable to pick on one constituency for the purpose of closing stores. But this is for you, your board and perhaps investors/lenders to consider carefully.In our view, normal CVA arrangements should include most if not all unsecured debts that the company has at ‘the line in the sand’. Remember secured debt stands outside the scheme but can influence it(**).  The benefit of this for the company is it reorganises its current liabilities, excluding secured debt, in exchange for an offer to repay a dividend over a period of years or a one-off payment. We call this the X dividend over Y years approach.By excluding debts such as non-domestic rates, employees’ debts, contingent liabilities, supply-side creditors and other short-term debt from the CVA, the company does not get the full benefit of the scheme. More importantly - in the case of Toys R’Us -  HMRC brought the CVA scheme down for £15m of unpaid taxes, which were excluded from the CVA. Toys R’Us is no more on the UK retail scene. Q3: If I vote against what happens? This is an equitable process, if 75% or more of the eligible votes are cast in favour then the CVA is approved.  If the vote falls short of that, the CVA is not approved and the company may go into administration or liquidation. Your vote may allow the CVA to be approved but your property agreement, lease or licence may be terminated by the CVA’s failure. Q4; If we vote in favour of the CVA what happens? As above the process requires votes to be cast either in favour, against or in favour with modifications. Your vote may allow the CVA to be approved but your property agreement, lease or licence may be compromised, or the rent reduced as set out in the CVA proposals. Q5: We are not sure what the CVA proposal we have received means for our property. Our insolvency practitioners, directors and regional managers are happy to give general guidance on the CVA’s terms and what the proposals may mean for you subject to the normal caveats and client conflict relationships. Do call us on 0800 9700539 Q6: I see there has been recent case law on CVAs.  What is the situation? Recent case law regarding the New Look and Regis CVAs has not changed the situation much.  Landlords are still treated as a creditor whose contracts have been compromised. That said, in the Regis case an arbitrary blanket discount on their claims of 75% was regarded as unfair. It is likely then that there will fewer cases of large discounts being applied to landlords’ claims for voting purposes and, in turn, that should make it more difficult for companies to impose CVAs on dissenting landlords. It is still possible to discount landlord claims for voting purposes, but the discount must be a reasonable method for estimating a minimum value.One of the most significant points to come out of judgments in New Look and Regis is that, where lease modifications at the landlords’ expense have the effect of increasing value for the benefit of shareholders, that benefit should be shared with the impaired landlords to avoid unfair prejudice.What if I want to know more about CVA? Please download our CVA Experts Guide with 120 pages of information here**Secured creditors can vote for the likely shortfall in their recovery if the company entered liquidation for example. Without relinquishing their valid security. Obviously, ALL secured creditors must be informed about the CVA process and take part in the scheme architecture.

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CVA Advice For Landlords

Caffe Nero appoint KPMG to assess options

in Hospitality News What is a CVA (Company Voluntary Arrangement)?

2.12.2020Gerry Ford,  the controlling stakeholder of Nero Holdings, pledges a £5m survival fund for Caffè Nero.Creditors of the coffee chain voted earlier this week and approved a CVA after the board refused to adjourn the vote following late emergence of a takeover bid.As part of the CVA, on the condition it was approved, shareholders committed to provide a £5m standby fund for the business, in case additional liquidity was needed. This is to be particaulary helpful in ensuring the survival of the business and protecting creditors until more normal trading conditions can return and when the agreed turnover-based rent structure can occur.30.11.2020Mohsin and Zuber Issa, the billionaire brothers behind the British petrol retailing powerhouse EG Group, have launched a takeover bid for Caffe Nero, just hours before the chain seeks approval from landlords to cut its rent bill.A CVA is to be voted on this afternoon. However, it is unclear if Caffe Nero has responded to the EG offer yet and so what the offer terms are - could the bid force the coffee chain to postpone the vote?Update 13.11.2020Last 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.------------------------------------------------------------------------It is understood that high street coffee chain, Caffe Nero, is the latest to look into rent cuts from its landlords in order to allow itself to recover from COVID-19 which has caused devastation to the hospitality sector.KPMG has been appointed to help the chain assess its options which include mechanisms to cut rents and close stores. Could a CVA, known to help struggling businesses cut rents and close stores, be likely?Caffe Nero has 660 UK stores, with almost all of its outlets, minus 30, reopening since the coronavirus lockdown ended in June.Before Coronavirus hit, 135 million customers were served annually and the chain had around 5000 employees. As with others in the hospitality sector, the unprecedented virus and lockdown has had a massive impact.A source close to the company has said that exectuvies have been engaging in ‘’constructive dialogue’’ with landlords but needed talks to intensify as the company seeks to address its fixed cost base.Sky News report more.

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Caffe Nero appoint KPMG to assess options
rest again

Administration followed by a CVA

in What Does Going Into Administration Mean? What is a CVA (Company Voluntary Arrangement)?

Administration followed by a Company Voluntary Arrangement What would be the purpose of using an administrator to propose a CVA? The answer is control over aggressive creditor actions, protection from landlord actions and a moratorium to prevent future legal actions before a CVA can be proposed. Given that it can take several weeks to build a viable CVA proposal sometimes creditors may already have started legal actions such as issuing a winding up petition or enforcement action.So, it may be necessary to put the company into administration to protect it whilst the detailed forecasts and CVA proposals are prepared and to discuss the scheme with the bank and other critical creditors. Once a viable CVA scheme is ready it becomes the administrators CVA proposals not the directors. So, in effect, the CVA can be used as a method of exiting an administration.The main reason your business might want to exit an administration is for reasons of cost and control. An administration is a powerful but expensive insolvency procedure. Powerful in that it can allow the business to trade and be sold if possible in a very short time scale if necessary. Expensive though, because the administrator has to run the company in place of the directors and has complete control of all the monies in and out of the business. They will also look at how to restructure the finances and one possible option is a CVA.If a buyer cannot be found but the business is viable and it will maximize the interest of creditors then a CVA is an acceptable exit strategy. The CVA will hand back the business to the directors and the insolvency practitioner and his / her team will continue to monitor the CVA as supervisors.So how does it work?The IP, once appointed by the board, will put together an administration proposal and get external asset valuations and statement of affairs drawn up. After getting floating charge holders consent, the IP will make an application to the court stating the purpose of the administration. The company enters administration and all legal actions are stayed by the moratorium in place. The IP then calls a creditors meeting to report on his proposals for the administration and then they will prepare the CVA. The CVA will then be published to creditors (a minimum of) 14 days before a meeting is scheduled to vote on the proposal. If the CVA is approved by creditors the CVA starts. 28 days later the IP applies to the court to end the administration and usually becomes the supervisor.The directors then get on with running the company under a CVA. Of course, they can exit a CVA early as well if they want. We have had a number of our clients do exactly that.

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Administration followed by a CVA

Buzz Bingo announce CVA plans to protect its future

in News What is a CVA (Company Voluntary Arrangement)?

This news comes as part of a coronavirus crisis rescue deal for the group.Buzz Group, the UK’s largest retail bingo operator by club numbers ahead of Mecca, said it had been forced to make ‘’difficult decisions’’ since its estate was placed into lockdown when the pandemic first hit.Chris Matthews, CEO told members that the permanent closures would be a part of a company voluntary arrangement restructuring deal to ‘’protect the future of Buzz Bingo’’.The following sites are listed to be shut down:Antelope Park (Southampton) Banbury Boston Bournemouth Bridlington Carlisle Chathnam Chorley Cramlington Debry Foresters Edinburgh Westerhailes Harpurhey Hereford Kilmarnock Milton Keynes Oxford Kassam Stockland Green Salford Sailsbury Tamworth Wednesbury Weymouth Wigan Robin Park Wolverhampton Worcester Wythenshawe573 jobs are at risk from the above listed 26 permanent bingo hall closures.Buzz, which also has an online operation, said its other 91 clubs would continue to trade. Re-openings are planned to begin at 12 sites from 6 August.Matthews stated: "The ongoing pandemic has had far-reaching consequences for the entire leisure and hospitality sector and an immediate and significant impact on our business. Following a thorough review of our options, the proposed CVA will restructure our retail portfolio to ensure we are well positioned for a return to growth, while adapting to the ongoing, challenging environment as we start to reopen the majority of our clubs."

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Buzz Bingo announce CVA plans to protect its future

What Happens if a CVA Fails?

in What is a CVA (Company Voluntary Arrangement)?

What happens if I enter into a CVA and then can't keep up the payments? Will I be personally liable for any debts? The above question was asked by a potential client and we feel that it would appropriate to respond to this.Firstly, a CVA is a Company Voluntary Arrangement so their is NO automatic transfer of debts to the individual. It is possible that a director may have personally guaranteed the debts of the company so, in that instance, yes they would be liable. Of course, that would have been the case whether the business went into a CVA or not and subsequently failed.So, if the company is not able to keep up the payments that does not mean that the company voluntary arrangement will be stopped and the business goes into liquidation. As supervisor, we would look to see if we can make a modification to the arrangement. This would mean that we would have to call another creditors meeting and put out an amended proposal. One quite common change is to extend the period that the CVA runs for. So, instead of 3-5 years we may look at extending to 5-7 years. Normally, but not always, the creditors do not wish to see a reduction in their total overall dividend. Of course, any modification will need to be voted for by the creditors.If the company is simply not viable anymore, and cannot continue to meet its obligations then, as supervisor, we will petition to wind the company up. It is still possible to go into a creditors voluntary liquidation but that would have to be handled by different insolvency practitioners as otherwise we would have a conflict of interest. I am a creditor/supplier of a business in a CVA: what if it fails? As a condition of the CVA the company must not increase its liabilities to any of its creditors. Therefore you must contact the supervisor of the CVA to point out that you are not being paid. In fact, if a new debt is building up then you are still able to take any legal action necessary to recover the debt. It has to be a NEW debt and not contain the debt that is bound by the CVA. I am already in a company voluntary arrangement that was organised by another insolvency practice but I can't keep up with the payments. The supervisor is unhelpful what can I do? Some CVAs do fail and it is often as a result of badly drawn up proposals. The company tries to pay back too much too quickly or the costs are not cut quick enough at the outset.Well, there maybe a solution to the problem in that someone may want to buy the business, restructure and recapitalise it. We do have contacts and access to some funds that can help with this.

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What Happens if a CVA Fails?