The Byron Burger chain of upmarket burger restaurants has announced that it will be looking for the support of its creditors by way of a company voluntary arrangement (CVA). Byron Burgers employs 1800 staff in 70 outlets. The company is asking for a 55% rent reduction on 20 of its restaurants and to open a dialogue with the landlords regarding continuing trading.
This is the latest in a line of businesses such as Toys R US that have been struggling recently and have looked at using the CVA mechanism. The CVA will allow the company to vacate some of its properties and close its branches which, according to the company, have not performed to expectations.
In order for the rent reductions to be binding on the other landlords, they will need the support of 75% by value. These landlord CVAs are becoming more popular as retailers struggle with high premises costs.
Rumours about the business' financial situation have been circulating since September last year when we reported that Byron confirmed it would be closing four of its outlets.
Simon Cope, Byron chief executive, said: "Byron's core restaurant business and brand remain strong but the market that we operate in has changed profoundly.
"In order to continue serving our loyal customer base, we need to make some critical and difficult changes to the size and shape of our estate."
CVAs are not popular with landlords as some see it as a way of businesses just dumping unprofitable stores. However, in order to do a CVA, the company has to be insolvent on one of the 3 tests. In this case, the business can argue that it is balance sheet insolvent as the ongoing costs and liabilities of the unprofitable stores will make the whole business insolvent.
If you are a retailer or hospitality business then a CVA can be a very powerful mechanism to save your business. See our page on retailer rescue or give us a call on 01289 309431