Update: Restaurant group Tragus to seek CVAs for Café Rouge and Bella Italia brands

Parent company Tragus is seeking to agree Company Voluntary Arrangements (CVAs) in respect of its Bella Italis and Cafe Rouge restaurant chains. Parent company Tragus is seeking to agree Company Voluntary Arrangements (CVAs) in respect of its Bella Italis and Cafe Rouge restaurant chains.

Wednesday, June 4, 2014
3:04 PM

Restaurants group Tragus is seeking to agree Company Voluntary Arrangements (CVAs) as part of restructuring plans for its Café Rouge and Bella Italia chains.

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Advisory and restructuring services firm Zolfo Cooper, which has been appointed to oversee the process, said the CVAs would enable Tragus to revise lease terms and refocus the businesses on “a more profitable core estate”.

The Café Rouge and Bella Italia websites currently list more than 200 sites, including more than 20 in the eastern region in towns including Bury St Edmunds, Colchester and Chelmsford and the Center Parcs holiday village at Elveden.

There is no indication at this stage of which branches are likely to be affected by the proposals.

Tragus hopes to switch the rents on 150 outlets to monthly from quarterly. Another 19 restaurants will see their rent reduced to 60% of current levels for two years and paid monthly. Lastly, another 32 outlets will see their rent reduced to 50% of current levels for three months. It said compromise payments would be made to all landlords asked to cut rents.

Private equity firm Apollo Capital Management, leader of a consortium which bought Tragus earlier this year from rival Blackstone, said it would commit £20million of new money to Tragus once a CVA was reached with landlords. In total it plans to invest £110m over five years in the Café Rouge and Bella Italia brands.

Zolfo Cooper has also been charged with identifying “equity sponsors” for the group’s Strada business, which has 56 sites across the country, also including a branch in Colchester. This effectively puts the business up for sale, with Tragus said to have placed a price tag of around £40m on the chain.

In addition, Tragus, which currently employs around 7,000 staff, also plans a debt-for-equity swap to cut its borrowings to £91million from £354m.

Peter Saville, a corporate finance partner at Zolfo Cooper’s restructuring team, and colleagues Alastair Beveridge and Catherine Williamson will act as nominees for the proposed CVAs.

“We are very pleased to be working with Tragus on this major project to create a more efficient business, which will preserve jobs while repositioning the business for growth,” said Mr Saville. “We are optimistic that creditors will accept the proposals set out, which have been designed to provide the best outcome for all stakeholders.”

Paul Hemming, a corporate finance Partner in Zolfo Cooper’s advisory services practice and head of the firm’s leisure industry team, will lead the process in respect of Strada.

He said: “We are confident that the well-known and popular Strada business will be attractive to a broad range of potential equity sponsors who are able to appreciate the quality of the brand and its management team.”

Zolfo Cooper added that neither the CVAs nor the Strada process would have any impact on the day-to-day running of the businesses for customers, employees, suppliers and trade partners.

The British Property Federation (BPF) said it had been given an opportunity to comment on the terms of the CVAs and praised Zolfo Cooper for its “commitment to open engagement”.

Liz Peace, BPF chief executive, said: “We were glad to be invited to consult on this CVA, as it shows the Zolfo Cooper’s commitment to working in a transparent manner.

“CVAs often mean landlords suffering the lion’s share of any loss and for fairness’s sake it is important they feel they are being dealt in a transparent manner. It will be for the individual landlords affected to vote on the CVA but, by consulting, the CVA supervisor has sought to ensure this proposal contains no hidden traps and increased its chance of success.”

Duncan Grubb, head of credit control at Hammerson plc and chair of the BPF’s insolvency committee, added: “Once again we have seen a constructive and transparent dialogue with an insolvency practitioner seeking to take account of landlords’ concerns.

“Whilst the BPF can neither endorse nor criticise the terms of the offer contained in this CVA proposal, landlords can hopefully feel confident that the CVA supervisor has taken account of their interests, and done their best to minimise the impact of the restructure where possible.”

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