The British Property Federation (BPF) has criticised the owners of independent coffee chain Love Coffee for seeking a restructuring deal it claims could leave several landlords and local authorities unpaid.

The lobby group, which represents the interests of commercial landlords, called the Company Voluntary Arrangement (CVA) “a massive step backwards” for insolvency negotiations and attempts to make the process more open and transparent.

In a statement, the BPF said that Love Coffee, which has 29 shops across the UK, the majority of which are in shopping centres, had stopped paying its bills and has also failed engage with landlords over the terms of the CVA.

The organisation has also accused the chain of being selective in its treatment of different classes of creditors, “picking and choosing which it is willing to pay” and offering no route for landlords to mitigate lost income, should it return to profitability.

However the directors of Love Coffee have refuted some of the claims, stating that it had engaged with landlords but had been unable to reach a consensual agreement.

The family-run business said it had not been immune to changes in consumer behaviour and had been negatively impacted by lower footfall and the loss of key anchor tenants near to its stores.

“Despite management action and the investment of £350,000 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.

“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,” the company said.

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.”

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