ICSM Credit News: Coffee chain chokes over a CVA; Pizza Hut’s financial restructure; and some rare good news with the high court ruling on business interruption insurance policies

Caffe Nero mulls CVA

The coffee chain Caffe Nero has appointed KPMG to assess options as it struggles to overcome the devastation of the lock downs caused by Covid-19.

Insolvency and accountancy outfit KPMG is to assess Caffe Nero’s options in cutting costs ranging from rent cuts so business closures and staff cuts.

The café has 660 UK outlets with all but 30 back open since June but all trading at drastically reduced levels of business. Before the Covid-19 crisis the café chain had 135m each year and 5,000 staff.

Ian Carrotte of ICSM Credit said: “When any company calls in administrators to look at a CVA or a sale, suppliers must be very careful. These are warning signs that they may go pop and the losers are suppliers. No name is too big to fail. Tighten credit control and be very careful is the best advice. Or better still don’t trade with them until things are settled.”

Pizza Hut’s CVA

Sky News have reported on details of troubled pizza business Pizza Hut’s CVA. The firm has 245 restaurants and has closed 29 already with hundreds of staff laid off.

The TV news group said they understand Pizza Hut is planning on switching over to a turnover rent model by, ‘ultimately paying its landlords based on the revenue levels of each of its 245 outlets.’

The company voluntary arrangement organised by advisers, Alvarez & Marsal will have to be agreed with creditors and suppliers in order to save the chain from collapse which would see nearly 6,000 staff lose their jobs and suppliers and creditors millions of pounds.

The company issued this statement: ‘’Despite government support, and entering lockdown from a place of strength, the cost of lockdown combined with reduced trading levels has had a substantial impact on the whole restaurant sector. Along with many other businesses, we are looking at ways to minimise that financial impact, while continuing to trade as usual. Whether this will require financial restructuring in the form of a CVA or otherwise is as yet undecided.’’

Already the casual dining market has seen casualties due to Covid-19. Café Rouge, and the Azzurri Group, who owns Bella Italia and Carluccio’s have already fallen into administration while Byron, Prezzo and Itsu are also mulling over their options. Pizza Express is also in the process of cutting staff and shutting outlets.

Ian Carrotte of ICSM Credit said although the Government’s Eat Out scheme had been successful in helping many pubs and cafes this summer but overall the lock downs had been devastating. He has backed calls for more Government help for all business sectors hit by the crisis.

Court case over Covid-19 insurance

This website doesn’t often bring good news since ICSM Credit’s concerns are about warnings over failing businesses to suppliers and reports on insolvencies and how they affect creditors. But for once a chink of light as the Financial Conduct Authority (FCA) have given many business owners relief in a court case concerning insurance claims over being forced to close in March.

Back in July the FCA took a case to the High Court to find clarity over whether firms that had been made to close on March 23 due to Covid 19, could claim off their business insurance.

“Typically the insurance companies said no,” said Ian Carrotte of ICSM Credit, “but for once there is some good news. Although there were some exemptions, most of the ruling out today (September 14) are in favour of the claims. Otherwise what is the point of business insurance?”

Lawyers Herbert Smith Freehills for the Government’s FCA said the court had ruled that insurance cover for businesses being forced to shut by order of the Government due to disease were mostly covered.

However Ian Carrotte said the ruling and any eventual pay outs by insurers may well come too late for many SMEs and small businesses like shops and pubs. “The ruling is welcome but businesses need cash flow and many simply were left high and dry by the shut downs in March,” he said. “It’s not like a shop closed its doors of its own accord. I just hope this ruling will now allow some businesses to claim for lost trade during the shutdown and live to fight another day. Business is tough enough as it is without insurance companies rejecting legitimate claims.”

About ICSM Credit

ICSM Credit has more than four decades of experience as a credit intelligence group whose members gain inside information about firms in trouble allowing them to avoid bad debts and rogue traders. To join costs less than a tank of fuel - while at the moment there's a special free temporary membership offer during the Covid-19 crisis which gives access to free legal letters. ICSM also has an effective debt collecting service which has a global reach - ask for details from Paul.

For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.

To keep up to date subscribe to the FREE ICSM Credit Newsletter to hear all the latest insolvency news and to see who has gone out of business click on the orange panel on the top left of the home page of the website www.icsmcredit.com or send an email to Ian.carrotte@icsmcredit.com

For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk