LONDON: The Restaurant Group announced a proposal to reduce the size of its Leisure estate and rental cost base by the implementation of a company voluntary arrangement (CVA).
The CVA will relate to the statutory entity “The Restaurant Group (UK) Limited” which principally comprises the Frankie and Benny’s estate. The arrangements will have no impact on the Group’s Wagamama, Airport Concessions and Pub operations.
The CVA will provide a mechanism to restructure the Leisure estate in line with the plan outlined in the Group’s last market update (on the 8th April 2020) by reducing the current portfolio by exiting approximately 125 trading sites as well as seeking improved rental terms on a portion of the remaining trading estate.
Assuming the CVA is approved and successfully implemented, this will leave a remaining trading estate in the Group’s Leisure business of approximately 160 sites. The CVA will also include a mechanism to exit approximately 25 previously closed Leisure sites, thereby further reducing the existing onerous lease provision held on the Group’s balance sheet.
The proposals reflect TRG’s proactive approach to ensuring a long-term sustainable business for all stakeholders in the face of unprecedented disruption to the UK’s casual dining sector. The CVA will not seek to compromise claims of any creditors other than certain landlords, and inter-company liabilities. The rights and entitlement of all trade suppliers, HMRC and employees will not be affected by the proposals.
Commenting on the announcement, Andy Hornby, Chief Executive said: “The issues facing our sector are well documented and we have already taken decisive action to improve our liquidity, reduce our cost base and downsize our operations. The proposed CVA will deliver an appropriately-sized estate for our Leisure business to ensure we are well positioned despite the very challenging market conditions facing the casual dining sector. I would like to wholeheartedly thank all of my TRG colleagues for their continued understanding and extraordinary commitment during this unprecedented period.”
Melanie Leech, Chief Executive, British Property Federation (BPF) comments: “These situations are never easy, particularly now for the retail and hospitality businesses on our high streets at the sharp end of the Covid-19 pandemic. Property owners, however, need to take into consideration the impact on their investors, including the millions of people whose savings and pensions are invested in commercial property, as they vote on any CVA proposal.
“The Restaurant Group and Alix Partners engaged with the BPF before launching this CVA proposal. This has provided us an opportunity to improve understanding of property owners’ interests and concerns, but ultimately it will be for individual property owners to decide how they will vote on the CVA.”
A comprehensive review of the Leisure estate portfolio has identified approximately 210 trading sites that are either underperforming; on unfavourable lease terms; or, in certain cases, not expected to generate future profitable returns going forward, or; subject to a combination of all three above factors.
Of these, approximately 125 sites have been identified for closure in the short term under the CVA proposal, with the balance of 85 sites being subject to a reduction in rental costs and revised lease terms.
The CVA will be proposed by TRG UK Ltd, a subsidiary of TRG. The CVA will not affect the current ordinary course operations of the rest of the Group (i.e. the Group’s Wagamama, Airport Concessions and Pub operations) and the Group continues to trade as a going concern.
The Restaurant Group is a significant player in the UK casual dining market with over 650 restaurants and pub restaurants. Its principal trading brands are wagamama, Frankie & Benny’s, Chiquito and Brunning & Price.
It also operates a highly diverse multi-brand Concessions business which trades principally in UK airports. In addition, the Wagamama business has five restaurants in the US and over 50 franchise restaurants operating across a number of territories.