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Mon 29th Jun 2020 - Creditors approve TRG leisure estate CVA
Creditors approve TRG leisure estate CVA: Creditors of The Restaurant Group (TRG) have approved the company voluntary arrangement (CVA) for its leisure business. More than 82% of all creditors voted in favour of the proposal, with 75% approval required for the CVA to proceed. More than 65% of the unconnected creditors also voted in favour, with 50% approval being needed. As announced by TRG earlier this month, the CVA will leave a remaining trading estate in the group’s leisure business of about 160 sites, of which circa 85 will be subject to a reduction in rental costs and revised lease terms. TRG said a more comprehensive update would be provided at the group’s interim results. The Restaurant Group’s leisure estate comprises about 313 branded restaurants, with Frankie & Benny’s, Coast to Coast, Joe’s Kitchen, Chiquito, Garfunkel’s and Firejacks as the primary brands. As exclusively reported by Propel earlier this month, the 214-page CVA document sets out four lease categories, with the largest (category 4), comprising 148 sites, mostly under the Frankie & Benny’s brand, earmarked for closure as part of the proposals. There are 28 sites in the category 2 leases part, with the proposal stating prior to the covid-19 pandemic the directors had concerns over their long-term viability. Similar to the category 2 leases, the directors had concerns over the long-term viability of restaurants under the category 3 leases – which comprises 62 sites – prior to the covid-19 pandemic. The document states 72 sites are placed in category 1 leases, which will not have rental payments compromised because they are either strategically important to the leisure business or, in the vast majority of cases, benefit from a parent company guarantee. TRG chief executive Andy Hornby said: “These are exceptionally challenging times for our sector and TRG is extremely grateful for the support shown by our creditors. The approval of the CVA is a critical component in ensuring the future prospects for our leisure business. I would like to wholeheartedly thank our colleagues who have shown extraordinary commitment throughout the process.”

Goodbody forecasts 40% of TRG’s total estate to remain shut: Goodbody leisure analyst Paul Ruddy said he expects circa 40% of TRG’s total estate to remain closed. Following the CVA, Ruddy expects the Frankie & Benny’s estate, which stood at 236 sites at the end of the 2019 financial year, to reduce to 110; Chiquito to reduce from 79 sites to 18; Wagamama is expected to remain at 144 sites, the concessions business is forecast to drop from 71 to 45 sites; Brunning & Price is estimated to have 73 outlets from the current 84; “others” are estimated to fall from 35 to ten while the four delivery kitchens are forecast to remain. Ruddy said: “Overall, this is a positive update from TRG. We have modelled the estate reducing in overall numbers to circa 404 sites from circa 650 last year. However, there was previously uncertainty about the cost of exiting some of the worse performing sites. Going forward, more than half of the estate will be made up of Wagamama, pubs and concessions, all of which should partake well in the recovery of the leisure sector post-coronavirus. Revised rental terms on circa 85 of the Frankie & Benny's sites that remain, most of which will now be turnover linked, is also a good positive. With the sector reopening on Saturday (4 July), the estate now more appropriately sized, and liquidity in order post the placing, TRG is a value way to play the potential recovery in eating out.” 

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