The British Property Federation (BPA) has commended Gourmet Burger Kitchen for engaging with it on its plans for a CVA – but admitted that individual landlords will ultimately be the ones to decide whether its proposals are accepted.
GBK revealed yesterday that it has earmarked 17 stores for closure after operating losses for the past six months reached £2.6m.
CVAs have been used by a number of restaurant chains to prevent their businesses from closing in the past 18 months. The process is typically used to restructure a company’s leased property portfolio in line with market valuations, and therefore reduce its financial commitment, but it has courted controversy among those who argue that it leaves landlords exposed.
Commenting on the GBK situation, Stephanie Pollitt, assistant director of real estate policy at the British Property Federation, said: “These situations are never easy as property owners need to take into consideration the impact on their investors, including those protecting pensioners’ savings, as they vote on the CVA proposal.
“Gourmet Burger Kitchen has, however, demonstrated best practice, engaging with the BPF early in the process, but ultimately, it will be for individual property owners to decide how they will vote on the CVA.”
GBK believes the CVA will provide a stable platform upon which its turnaround plan can be delivered.
It said it has “fully engaged” with the BPF and its members and their views are reflected in what it thinks is a fair proposal to restructure the property obligations of the company.
Earlier this year, the British Property Federation called on the government to conduct an urgent view into CVAs after claiming that the process is now being “misused”.
While the BPF did not accuse any companies by name, it said those that are misusing CVAs risk undermining the UK’s global reputation and deterring much-needed investment into town and city centres.
It said the main issues included a lack of transparency, unfair discrimination between different creditors and a lack of regulation to ensure CVAs are used appropriately and to drive good practice.
The BPF said it wanted the government to conduct an “independent urgent review” into the issue and that in the meantime it would advocate a series of steps to restore confidence.
This included referring CVAs affecting more than five outlets to an independent third party for review and requesting that the insolvency profession and the BPF work together to codify what is good practice in terms of voting rights and voting structures for CVAs.
Melanie Leech, chief executive of the British Property Federation, said: “The CVA process is intended to be part of a comprehensive business recovery plan. Property owners, looking after savers and pensioners’ money, will support businesses who demonstrate this commitment but must protect those pensioners against unfair action that penalises their interests. Urgent action is required and we are calling on government to undertake a review, so that we can restore the CVA process to its original purpose.”