Caffe Nero launches CVA as second lockdown 'decimates trading'

Suban Abdulla
·3-min read
LONDON, UNITED KINGDOM - 2019/08/09: Coffee store, Cafe Nero seen in central London. (Photo by Steve Taylor/SOPA Images/LightRocket via Getty Images)
The chain hopes to use the CVA to negotiate for better terms with landlords to slow down the flow of cash away from the business. Photo: Steve Taylor/SOPA Images/LightRocket via Getty Images

Caffe Nero has launched a Company Voluntary Arrangement (CVA) as part of a restructuring plan after COVID-19 and the second lockdown pushed it into a corner.

The coffee chain, which employs 6,000 workers, said "the pandemic has decimated trading.”

Caffe Nero’s founder and chief executive, Gerry Ford, said that it was “imperative” that the business takes steps to reduce pressure, as its cafes were forced to close for a second time.

The chain hopes to use the CVA to negotiate for better terms with landlords to slow down the flow of cash away from the business.

In the event that Caffe Nero has to shut down any outlets “it will try to redeploy workers, and store closures and job losses will be “minimal,” a spokesman told PA.

Ford, said: “Like so many businesses in the hospitality sector, the pandemic has decimated trading, and although we had made significant progress in navigating the financial challenges of the first lockdown, the second lockdown has made it imperative that we take further action.”

A CVA is a formal agreement between a business and its creditors which gives firms the chance of recovery.

It sets out how repayments of company debts should be made to creditors and can deliver a better outcome than an administration or liquidation. After 14 days creditors are asked to vote and at least 75% must agree.

All non-essential businesses are closed as part of the second England lockdown rules.

Lockdown measures have particularly hit the coffee chain and other businesses like it, which cater to many commuters and office workers.

Founded in 1997 by Ford, it has expanded into 11 different countries, with a total of 1,000 stores. Caffe Nero owns 800 stores in the UK.

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Restructuring experts from KPMG, Will Wright and David Costley-Wood, will handle the CVA.

Wright said: “Caffè Nero is an iconic brand on the UK’s high streets with a terrifically loyal customer base. However, like many others across the sector, the impact of measures introduced in response to the COVID-19 pandemic has been devastating.

"In putting forward this CVA proposal, the directors have worked hard to strike a fair compromise with stakeholders to provide the flexibility the business urgently needs to get it through the pandemic."

It is the latests in a long line of high street companies which have turned to insolvency specialists to avoid complete collapse.

Last week, Clarks launched a CVA last week that will see most of its 320 UK stores moving to rents based on turnover — where rent is calculated on the amount of cash that goes through the tills. As part of the plan, around 60 shops will shift to zero rent and all arrears built up during COVID-19 will go unpaid.

Clarks will get backing from Hong Kong-based private equity giant LionRock Capital, which pledged a £100m ($132m) investment, conditional on the CVA being approved and passed without legal challenges.

Retailers including New Look, Jigsaw and Edinburgh Woollen Mill have all used insolvency processes to reduce debts as struggling stores buckled under the pandemic pressures and restrictions on high streets.

Restaurants and bars have also turned to CVAs. Pizza Express, Pizza Hut and Revolution Bars have all used the insolvency tool.

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