EG Group warns UK coffee chain Caffè Nero of legal challenge after bid rejection

Struggling Italian style British coffee shop chain Caffe Nèro is pursuing a Company Voluntary Arrangement so that it can try to renegotiate terms with its landlords and other creditors.

However this arrangement could face a legal challenge from landlords, reports reveal. The coffee chain’s plan was also thrown into confusion by an eleventh-hour bid from EG Group.

The approach was rebuffed, although it is understood that Mohsin, 49, and Zuber, 48, who are buying Asda from Walmart, remain interested. Under EG’s bid, landlords would have been paid in full for rent arrears during the pandemic, compared with 30p in the pound under the CVA.

Caffè Nero is seeking approval for a rescue deal that would see its rents cut after sales slumped in lockdown. It dismissed the bid as “opportunistic” and vowed to go ahead with its plan.

Sky News reported that a source close to the situation said that EG’s law firm, Kirkland & Ellis, have told Caffè Nero that a deal could be agreed within two weeks, reducing any uncertainty for the company’s workforce of more than 5,000 people.

Julian Dailly, head of retail insights at brand intelligence specialist Savanta, said: “The firm’s heavily urban site base has been hit harder by the drop in footfall as offices and city centres closed, while competing shops have adopted new approaches to attracting and retaining customers, including convenience store vending machines, delivery services, and drive-thru sites. Any new owner of the business will need to address these challenges as a priority if the brand is to return to its past success.”