A CVA by coffee chain Love Coffee has been criticised by the British Property Federation for leaving landlords out of pocket.
The BPF said Love Coffee’s CVA proposal was a “massive step backwards” for open and transparent insolvency negotiations.
It claimed Love Coffee had stopped paying bills, failed to engage with landlords and had been selective in the treatment of different landlords, with no route for landlords to mitigate lost income, should it return to profitability.
Ian Fletcher, director of policy at the BPF, said: “The CVA put forward by Love Coffee represents the very worst example of insolvency negotiations we have seen, and is unacceptable in its treatment of landlords who have fulfilled their obligations, only to be ignored and left out of pocket. The company also leaves the taxpayer short with unpaid business rates bills.
“The directors of Love Coffee have taken a highly unorthodox, selective approach to deciding which creditors they see fit to pay, and its insolvency practitioner should be scrutinised by their regulators.”
Love Coffee has 29 stores across the UK including in Westfield Stratford.
In a statement a spokesman for the directors of Love Coffee said it had been hit by the trends on the UK retail market, with some of its coffee shops hit by the loss of key anchor tenants in neighbouring shops with a knock-on lower footfall.
He said: “Despite management action and the investment of £350k of new funds into the business over the past twelve months by the shareholders the performance of a minority of stores has deteriorated to such an extent that it is impacting on the viability of Love Coffee.
“Prior to the commencement of the CVA process the directors were negotiating with the Landlords of the under-performing stores, but despite prolonged negotiation they have been unable to reach a consensual agreement to ensure the revised rental terms are sustainable for the business or reflective of current market values.
“Consequently, to protect the underlying business and the interests of the majority of Love Coffee’s stakeholders the directors regrettably are proposing this voluntary arrangement as a means to address the under-performance of a minority of stores, thereby ensuring the long term viability of Love Coffee.
“The proposal ensures there is a significantly higher return to creditors than would be the case in the event of the business’s failure.
“The Directors acknowledge the impact on the compromised creditors, therefore they have included a profit kicker ensuring compromised creditors benefit from the future anticipated profitability of Love Coffee.”
