June 5, 2020 / 3:11 PM / a month ago

Cafe Rouge, Bella Italia could see nearly a third of outlets closed: sources

LONDON (Reuters) - Britain’s high-street restaurant chains Bella Italia, Cafe Rouge and Las Iguanas could see around 30% of their outlets cut, two sources told Reuters, as their owner pushes ahead with talks to sell the businesses stricken by the COVID-19 crisis.

FILE PHOTO: A worker packs away tables and chairs at a Cafe Rouge restaurant as the number of coronavirus cases grow around the world. London, Britain, March 17, 2020. REUTERS/Hannah McKay/File Photo

Casual Dining Group, owner of those chains and several others, is in negotiations with potential buyers for its entire estate, the sources said.

The closure of outlets and some of the smaller chains in its portfolio are on the table as part of this, they added.

Some of the smaller chains in CDG’s portfolio - such as Belgian-inspired Belgo and Huxley Bar & Kitchen - could be at risk altogether, said one of the sources, with buyers looking to buy a leaner and more profitable business.

The company is also negotiating lower rents from landlords.

CDG declined to comment. Its private equity owners KKR (KKR.N) and Pemberton Capital Advisors were not immediately available for comment.

Last month the company hired Alix Partners and Kirkland & Ellis to explore options, including administration for all or part of the group.

Slim margins and overcapacity mean many restaurant chains in Britain will downsize or disappear from the high street altogether after nearly three months of closures due to the novel coronavirus lockdown.

With the industry preparing to reopen from July, social distancing is expected to hit it hard given its dependence on heavy footfall and quick turnaround of customers.

“Social distancing is not going away any time soon and the issues that had previously weighed on the food industry, such as business rates, and food and drinks’ increase in costs, are being exacerbated by the crisis,” said Ciara Cullen, food and drinks lawyer at RPC.

For an overview of popular high-street restaurants seeking restructuring, click here [nL8N2D15JO]

An industry study by CGA AlixPartners Market Recovery Monitor shows that at the end of March this year, the pre-lockdown number of licensed premises in Britain stood at 115,108, a 2.4% reduction on March 2019.

That rate of decline is set to accelerate rapidly in the coming months.

Although 96% of business leaders in the pub, bar and restaurant industry are expecting a phased re-start, only a third believe they will eventually re-open all their sites for trading, according to the report.

Italian high street chain Carluccio’s was recently sold to Boparan Restaurants, owner of the Giraffe chain, which will only retain 30 out of its 70 sites. [nL8N2D449R]

Pizza Express is also facing headwinds, with its 465 million pound debt maturing in August 2022 trading at a cash price of 15 pence on the pound. Anything below 60 is considered “distressed” territory.

($1 = 0.8123 pounds)

Reporting by Abhinav Ramnarayan and Clara Denina; Editing by Jan Harvey

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