Tragus is to undergo a financial restructuring, which will include the launch of company voluntary arrangements (CVAs) for Café Rouge and Bella Italia, and the sale of Strada, to ensure a long-term sustainable future for the business.
As part of the restructure, the group’s owners have sought to strengthen the balance sheet and reduce the debt burden by around £263m to £91m.
M&C Report understands that the c290-strong group is looking to shed 51 sites from both its 90-strong Bella Italia and 125-strong Café Rouge estates through the CVA process. It is thought that around 40 sites will eventually be disposed off through the process.
It has initiated a CVA to revise lease terms, and refocus the business on a smaller, more profitable core estate principally comprising Bella Italia and Café Rouge. Landlords are currently being sent information for them to vote on the proposal.
Subject to successful completion of the restructuring process, it is thought Apollo Global Management will commit £110m to invest in the business over the next four years and is looking to open a further 50 sites over that time, including 12 Bella Italia sites in the next 12 months.
As previously flagged up by M&C Report, it is thought that Apollo may also back a management buy-out of Strada, which is led by new managing director James Spragg. Zolfo Cooper has been appointed to oversee the sale of the 56-strong Strada, which is valued at c£40m.
All Strada restaurants and those under CVA proposals will continue operating as normal in the near-term.
It is also thought that part of the £110m of investment could also be used to explore bolt-on acquisitions.
A source said: “The heart of the matter is Tragus had a hugely overleveraged balance sheet (unsustainable debt level) which has stopped investment and innovation in the brands and the group has seen profit decline over the last five years caused by a clearly defined and significant non-core tail.
”Having said that the brands remain well-loved by customers and remain very popular and profitable, the restructure is about creating the right platform and conditions for them to grow again. To this end early trials of a new Bella and Café Rouge format have proved to be very successful and it is the intention to aggressively refresh and expand both brands.
“The restructure is about creating the right platform and conditions for them to grow again. To this end early trials of a new Bella and Café Rouge format have proved to be very successful and it is the intention to aggressively refresh and expand both brands. The balance sheet will be exceptionally strong (2.5 x debt to ebitda) and the business will have access to substantial funding to grow (£110m capex over fove years).”
The CVA would enable the Steve Richards-led company to shed or restructure some of its rent obligations at Cafe Rouge and Bella Italia.
Richards told M&C Report: “The core of the business is strong; we have a loyal customer base and valued brands, but some of these brands, such as Bella Italia and Café Rouge, require innovation and substantial investment to secure their futures. Similarly, Strada is a popular restaurant brand beloved by customers, but it needs separate attention and investment to realise its full potential.”
Richard said the restructuring plan was crucial for reducing the group’s unsustainable level of debt, providing the right operational structure for the business and securing a “strong and sustainable future for Tragus and all of our brands”.
