High Court dismisses legal challenge to Caffe Nero restructuring

The high court has dismissed a legal bid by one of Caffe Nero’s landlords to overturn its restructuring plans.

On Wednesday a judge denied the attempt to block the coffee chain’s Company Voluntary Arrangement (CVA), rejecting all allegations of ‘material irregularity and unfair prejudice’.

The challenge was brought by landlord Ronald Young, who court documents show was paid £100,000 by the Issa brothers’ EG Group, which owns restaurant chain Leon, to pursue the case.

Caffe Nero, which has more than 800 UK stores, turned to a CVA last year after the pandemic saw a drop in footfall at its stores. More than 90% of creditors approved the CVA, which saw landlords receive 30p in every pound of rent they were owed.

However, EG Group lodged a last-minute takeover bid the day before the CVA vote. Caffe Nero rejected the proposal, which had included paying landlords in full.

Young challenged the decision by Caffe Nero to reject the Issa’s offer, rather than postpone the CVA process to further consider it.

However, Mr Justice Green ruled that the company had "acted in good faith, in accordance with their professional duties and reached a perfectly reasonable decision that it was not in the best interests of the creditors to postpone the CVA Process”.

A spokesperson for Caffe Nero said: “We welcome the positive verdict and are delighted that the judge supported our position on all counts. This has absorbed a lot of time and attention over the last nine months and we are grateful to our creditors, our staff, our advisors and, especially, to our landlords for their patience and understanding during this case.

“This was an unsolicited and unwelcome attempt to de-stabilise our business by the EG Group, who funded a single landlord to pursue the challenge. We look forward to managing our business without further disruption. Since trading restrictions have been lifted, our sales have gone from strength to strength and we are now closing in on pre-pandemic levels.”

EG Group is continuing to grow its restaurant business this week acquired 52 KFC restaurants in the UK. The Issas also acquired supermarket chain Asda for £6.8b this year and own the Stanley House Hotel & Spa in Lancashire.

EG Group did not respond to a request for comment.

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