Further details today emerged of the challenges faced by the Jamie’s Italian restaurant chain, with the weekend papers suggesting the business has racked up debts of more than £70m.
Creditors of the firm have now officially agreed to rent cuts and site closures in a move aimed at ensuring the business can continue to trade.
It is understood that 95% of creditors agreed to restructuring proposals as part of a company voluntary agreement (CVA) following the management’s decision to hire AlixPartners to help set out its options.
According to the Telegraph, landlords have been split into four categories as part of the CVA depending on how profitable the sites are. The 18 best-performing restaurants will continue to pay full rent but will move to doing so on a monthly rather than quarterly basis. A second group of 11 will take a rent cut of 30%.
The third band of 13 landlords will see their payments cut by 75% and Jamie’s Italian only plans to pay this until May because the sites are either loss-making of forecast to become so soon and so will be closed.
The outstanding four sites operated by the company will receive nothing because Jamie’s Italian has already ceased trading from those locations, the report added.
Peter Saville from AlixPartners’ turnaround and restructuring services team described the decision as “significant step in the restructuring of Jamie’s Italian”.
Jamie’s Italian’s accounts for full-year 2017 haven’t been published yet, but its numbers for the year to January 1 2017 reveal that sales dropped nearly 4% to £112m, while operating profits plunged to £8.7m, from a profit of £3.3m the year before, due to costs linked to site closures.
Its accounts show that it secured a bank loan of £17m until 2020 and a revolving credit facility of £15m. Cash in the bank at January 1 2017 was £6.5m, up £3m on the previous year.
The Sun on Sunday, meanwhile, reported yesterday that Jamie’s Italian faces debts of £71.5m. It claims to have seen High Court documents that show it owes £30.2m in overdrafts and loans, and £41.4m to creditors such as HMRC, landlords and suppliers.
Suppliers are collectively said to be owed £400,000, with Balthazar Wholesale Bakery (£133,000), Daily Fish Supplies (£263,000) and Camden Town Brewery (£41,000) topping the list in terms of the amounts outstanding.
The paper claimed that Jamie Oliver has put £3m of his own money into the business and his other group has loaned it £6.5m, but said legal papers blamed underinvestment, unsuitable new locations and high costs for the difficulties it has faced.
In a statement released on Friday, before reports on the size of its debts were published, Jamie’s Italian said: “We are pleased to have received the overwhelming support from our creditors for our proposal to reshape Jamie’s Italian restaurants. We have a strong brand and are focused on continuing to deliver the levels of service, taste and the experience our loyal customers deserve. We are working hard to ensure that our estate is fit for the current trading environment and we feel confident that this newly shaped business will provide strong opportunities for growth and profitability.”