Creditors of embattled casual dining chain Carluccio’s have been given two weeks to decide if they wish to back restructuring proposals that could potentially lead to more than 30 stores closing.
Speculation that the company would announce a company voluntary arrangement (CVA) has been mounting for several weeks, but it took until yesterday for management to officially confirm the step.
Carluccio’s operates 103 restaurants across the UK and the CVA document that is being prepared for creditors will propose that 34 sites receive a rent reduction equivalent to 67% over the next six months while talks are held with landlords to determine their future.
The remaining 69 sites will be retained at current rents and are not in danger.
Will Wright, restructuring partner at KPMG and a proposed supervisor of the CVA, said the restructuring plans were agreed following a strategic review of the business undertaken by the company’s directors.
“Carluccio’s is a well-established and much-loved part of the UK high street. But like many other businesses in the casual dining sector, in recent times the company has been adversely impacted by a combination of well-documented pressures including a gradual decline in consumer spending and increasing competition, coupled with the rising costs of labour, raw materials, rent and business rates,” he said.
“This CVA is designed to tackle the cost of the company’s leasehold obligations across its restaurant portfolio, which if successful, will allow the business to move forward across a core, more profitable estate. Crucially, it forms one element of a wider turnaround plan which, pursuant to the CVA’s approval, will see an injection of funding into the business from the company’s majority shareholder, to fund an extensive and far-reaching investment and growth plan.”
Carluccio’s needs to secure at least 75% creditor approval for the CVA for it to proceed. Creditors will vote on the CVA on 31 May, with KPMG saying that it will spend the next fortnight making sure that all parties understand the full detail of the proposal.
The Italian chain follows the likes of Byron, Jamie’s Italian and Prezzo in entering a CVA this year in order to safeguard the future of their businesses.