January 26, 2021

Caffè Nero owners brew £5m 'survival fund' amid row over CVA

December 02, 2020

The owner of Caffè Nero is pledging £5m to a 'survival fund' aimed at withstanding any renewed escalation of the coronavirus crisis as it braces itself for a legal challenge from landlords.

Sky News understands that Gerry Ford, Nero Holdings' controlling shareholder, agreed to establish the war chest as part of the coffee shop chain's financial restructuring.

Creditors to Caffè Nero voted this week to approve its company voluntary arrangement (CVA) after its board refused to adjourn it despite the eleventh-hour emergence of a takeover bid from EG Group, the petrol retailing giant run by two Lancashire-based billionaire brothers.

Mr Ford and Ben Price, Caffè Nero's finance chief, are the company's only directors and shareholders, but would receive little for their equity under the EG Group bid.

Landlords, however, would have gained substantially from the EG Group offer, and a number are now expected to launch a challenge to the company voluntary arrangement (CVA).

"As part of the CVA, shareholders committed to making a £5m standby fund available to the business if a CVA was approved, in case additional liquidity was needed," a Caffe Nero spokesman said.

"The fund, if required, would help ensure the survival of the business and protect creditors until more normal trading conditions prevail where they will benefit from the agreed turnover-based rent structure."

Sky News revealed this week that lawyers for EG Group, headed by Mohsin and Zuber Issa, had written to Caffè Nero's parent company to highlight the likelihood of a landlord rebellion against its company voluntary arrangement (CVA).

Under the CVA, which is being run by KPMG, landlords face losing the majority of the rent arrears they are owed, while EG is promising to pay them in full - a sum understood to be worth tens of millions of pounds.

Responding to the offer from EG, Caffè Nero dismissed it as "an unsolicited, highly uncertain approach" - a characterisation disputed by the potential buyer.

Caffè Nero employs more than 5,000 people and trades from hundreds of stores across the UK.

Like rivals such as Pret a Manger, Caffè Nero has been heavily impacted by the reduced footfall in city centres as millions of Britons continue to work from home.

Pret and Costa Coffee, which is owned by The Coca-Cola Company, have been among the market's big players forced to make substantial redundancies since the start of the pandemic.

Caffè Nero and EG declined to comment.

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