Parent Company of Cafe Rouge Approves Restructuring and Company Voluntary Arrangement (CVA)

Cafe Rouge Company Voluntary Arrangement
Cafe Rouge: Approved restructuring and Company Voluntary Arrangement proposal

The creditors of dining firm the Tragus Group, whose subsidiaries include Bella Italia and Cafe Rouge, have given the green light to proposals which will see both businesses restructured dramatically through the implementation of a company voluntary arrangement (CVA).

Earlier this month, Tragus unveiled its intention to instigate a substantial financial and organisational restructure of their company, in order to reduce the high levels of debt they had accumulated and ensured that the long-term future and sustainability of the business.

And it appears as if the group has succeeded in its aims to minimise their short-term financial strain by securing the majority approval from its creditors it required to officially set up a Company Voluntary Arrangement and reduce their debt burden by £263 million.

The dining giants had already outlined their intention to utilise a company rescue solution which would reduce their rental bill and stabilise their precarious monetary situation, and the news that between 80% and 90% of their creditors and landlords approved their entry onto a Company Voluntary Arrangement will bolster their resolve that both these aims can be achieved in the near future.

Under the conditions of the CVA, the Tragus group will be required to continue to make their full monthly rent payments on 150 of their 209 restaurant sites, though these monthly contributions will be halved on 32 of their buildings for three months and reduced by 60% from existing levels on 19 other properties.

The company have identified their aim to use the CVA to reduce the business’ debt burden from its current value of £354 million to a more manageable £91 million, and outlined its intention to secure the sale of another one of its arms, the Strada Brand, by the end of this summer in order to further this goal.

Tragus Group CEO, Steve Richards, said: “We are pleased that creditors have accepted our proposals to create a more operationally efficient business.

“The future looks bright for Tragus and we are now able to focus on investing in and revitalising the Bella Italia and Café Rouge brands and pushing ahead with the sale of Strada.

“We already have plans in place to open twelve new Bella Italia restaurants over the next year and expect over fifty more restaurants to open over the next five years.”

Mr Richards added that Tragus intended to use £110 million of the £200 million given to the business by Apollo in order to improve the aesthetics of Bella Italia and Cafe Rouge buildings and perform renovations on company sites that are deemed to need it.

‘More sustainable business’

Meanwhile, senior insolvency advisers of an independent company rescue group, have been officially tasked with supervising Bella Italia and Cafe Rouge’s company voluntary arrangement, after the agreement was reached between the business, its landlords and creditors to officially enact the Company Voluntary Arrangement.

Peter Saville, Alastair Beveridge and Catherine Williamson insolvency practitioners within the Restructuring Services team have been assigned the task of supervising the CVA in the role of nominees, with all parties appearing optimistic about Cafe Rouge and Bella Italia’s chances of recovery and success in the future.

“The CVAs were carefully designed to provide the best outcome for all stakeholders and we are delighted that the proposals have been approved by such a large number of creditors,” said Saville.

“The approval of the CVA proposals will create a more sustainable business and we are pleased to see such a high level of support from the group’s landlords. This enables Tragus to restructure its business for a sustainable future and to preserve jobs by focusing on a more profitable core estate.”

A Company Voluntary Arrangement is an insolvency procedure whereby an agreement is reached between a company and their creditors to lower the business’ debt burden and extend the struggling business debt repayments over an extended and pre-determined length of time (maximum of five years). Insolvency practitioners are required in order to manage, regulate and facilitate the agreement.

And in cases when rental costs are lowered as a result of the CVA, a comprise payment is given to the business in questions landlords.

It is also believed that the corporate finance staff are collaborating with Tragus’ other restaurant business, Strada, in order to attain new equity for the 56 building franchise.

Paul Hemming, a corporate finance partner in the Advisory Services practice said:

“Since we started the process earlier this month, we have had a large number of highly credible expressions of interest. We will continue the process, working towards the best outcome for all stakeholders. This should be achieved by the end of the summer.”

Steve Richards, chief executive of Strada, identified that first round bids for the company are due next week and was optimistic about the chances of securing a sale in the upcoming weeks.

“There has been a good level of interest and we will review the bidders next week.”

External government links:

  1. https://www.gov.uk/company-voluntary-arrangements
  2. http://www.insolvencydirect.bis.gov.uk/insolvencyprofessionandlegislation/research/corpdocs/CVA-Report.pdf

 

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