Prezzo’s decision to take a 25-year lease on a unit in Woodley, near Reading, exuded confidence. The Italian restaurant chain agreed in September 2016 to pay an annual rent of £70,000. The landlord, John Hicks, watched as his new tenant spent £750,000 on stripping out and redecorating the property. Prezzo had been taken over two years earlier by the American private equity firm TPG, which planned to capitalise on a trend for casual dining by aggressively opening new sites. So Hicks was surprised when the restructuring firm Alix Partners wrote to him this March to say that Prezzo urgently needed to close 94 of its 300 sites — including the one he owns in Woodley. Alix Partners, working on Prezzo’s behalf, said the chain’s like-for-like
The growing reliance on company voluntary arrangements (CVAs) by struggling retailers is putting healthy companies at a competitive disadvantage, according to critics of the device. Retailers and restaurant chains including Prezzo, New Look and House of Fraser have resorted to CVAs to escape leases and extract large discounts on rent. Landlords are reportedly enraged at how they are expected to take the financial hit from store closures and rent cuts, while bondholders and other creditors are often left untouched because of the rise of what are being called “landlord-only” CVAs, which affect only leases.