Caffe Nero considers CVA as it battles COVID-19

LaToya Harding
·Contributor
·2 min read
Caffe Nero
Caffe Nero is one of the largest coffee shop operators in the UK, employing around 5,000 staff. Photo: Nathan Stirk/Getty Images

Caffe Nero is mulling a company voluntary arrangement (CVA) to launch talks with landlords as it struggles through the health crisis.,

The beleaguered coffee chain has yet to make a final decision about a CVA, although sources say one is expected in the coming weeks as it aims to reduce its rent bill, Sky News first reported

The privately owned group, which is one of the biggest coffee shop operators in the UK, employs around 5,000 staff.

Further details about the consequences of a CVA, including numbers of job losses or shop closures, were unclear on Friday. However, sources have said the company is working with KPMG on its options, which include rent cuts from landlords as part of any restructuring deals.

A CVA is a formal agreement between a business and its creditors which gives firms the chance of recovery. Companies use them when they can no longer sustainably afford to pay their debts.

It sets out how repayments of debts should be made to creditors and can deliver a better outcome than an administration or liquidation.

After a period of 14 days creditors are asked to vote and at least 75% must agree.

CVAs have become increasingly popular over the last few years as Britain’s high street suffers from declining footfall, increased business rates and the rise of online shopping. The coronavirus pandemic has only heightened the issues retailers are facing.

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Earlier this year the British Property Federation (BPF) warned that retailers are “weaponising” CVAs as part of a bid to cut costs. It said that the restructuring technique is being abused and landlords are suffering as a result.

BPF boss Melanie Leech said: “We support a rescue culture, but CVAs are being weaponised.

“Rather than as part of a sustainable rescue plan for those in genuine distress, they’re becoming a boardroom negotiating tactic for solvent businesses to rip up leases freely agreed with property owners.

“The process is discriminating against property owners, allowing non-affected creditors to vote on a CVA, yet forcing property owners to absorb the lion’s share of the burden.”

Yahoo Finance UK reached out to Caffe Nero for comment.

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