Restructuring Plans

The casual dining chain, Prezzo, faced an uncertain future after financial pressures impacted its profitability. The business pursued a Restructuring Plan, a set of procedures and measures that was introduced as part of the Corporate Insolvency and Governance Act 2020 to better support companies in financial distress.

Phil Reynolds, Partner at FRP, worked with the Company to create a proposal that would deliver a viable business model to face current and future hospitality sector challenges head on. However, the company faced objection to the plan from HM Revenue and Customs (HMRC) claiming it was being used to avoid paying tax.

FRP’s multi-disciplinary team including Restructuring, Financial Advisory and Valuations support across several FRP locations provided financial advice to Prezzo including a valuation of the business, an assessment of the likely return to creditors under a number of alternative scenarios and an assessment of the viability of the business post successful implementation of the Plan.

Due to the evidence put forward, Prezzo was successful, resulting in the landmark ruling. In the court ruling, the Honourable Mr Justice Richard Smith clearly recognised that “the alternative of administration will be a costly and value destroying process”.

Phil Reynolds, Partner at FRP Advisory, said: “The Prezzo judgement gives valuable guidance to companies that are considering a Restructuring Plan and have demonstrated that the process can be successfully and cost-effectively used for mid-market companies, in this case, enabling the Company to reposition its business model and also provide its stakeholders with a significantly higher return.

“Restructuring Plans allow businesses that are experiencing significant financial pressures to act early. With greater legal clarity following this landmark ruling, we expect Restructuring Plans to start to realise their full potential. They clearly provide a viable alternative to an insolvency process and are useful tool when looking at how best to restructure a business.”

The London-headquartered business – which is behind the dim-t and Wildwood restaurant chains – faced an uncertain future after persistent difficult trading conditions impacted its profitability. The business subsequently pursued a Restructuring Plan, a set of procedures and measures that were introduced as part of the Corporate Insolvency and Governance Act 2020 to better support companies in financial distress.

Led by Restructuring Advisory Partner, Phil Reynolds, a multidisciplinary team from FRP comprising restructuring, financial advisory and valuation specialists worked to provide Tasty with a strategic review of the business and reshape its business model to return to profitability and secure a long-term future, while delivering the best possible outcome for all stakeholders.

With legal support led by Sarah Teal of Shoosmiths LLP and Matthew Weaver KC of Radcliffe Chambers, the team also assessed the potential outcomes for stakeholders in alternative scenarios and provided a valuation of the business.

Tasty’s board expects the Restructuring Plan to help enable a significant improvement in profitability, and ensure transformation to meet new opportunities in the sector, including new audiences, concepts and potential partnerships.

This is the latest in a string of successful Restructuring Plans secured by the FRP team. This included helping restaurant chain Prezzo become the first mid-market business to successfully implement a Restructuring Plan in July 2023.

Phil Reynolds, Restructuring Advisory Partner, said: “Since their introduction in 2020 we’ve seen Restructuring Plans provide more and more businesses with a viable alternative to the insolvency process. This case is just the latest example of how effective it can be in providing a better outcome for all stakeholders, including where a company is AIM-listed.

“Tasty now has the platform it needs to pursue its strategy for future growth. We look forward to seeing how the business continues to develop in the years ahead.”

Sarah Teal, Partner at Shoosmiths, said: “it was a pleasure to have advised Tasty PLC on its restructuring plan which will allow the business to emerge stronger from the challenges posed by economic market pressures. The hospitality sector was understandably one of the hardest hit by the Covid-19 crisis and has been further knocked by the cost of living and interest rate rises. We wish the Tasty team all the best for the future.”

Clintons is a well-known retailer of greeting cards and has a network of stores across the UK. Since the Covid-19 pandemic, the business sought to ‘right-size’ its operations to reflect the challenges facing the wider UK high street.

Since 2019, Clintons had been forced to close 159 stores in response to changing consumer behaviour, increased online competition, the impact of the Covid-19 pandemic, inflationary pressures and increasing rents and business rates. Without further restructuring the business was facing insolvency.

The Restructuring Plan will enable Clintons to continue with its transformation plan and trade confidently with a more sustainable structure.

Experts from across FRP worked with Clintons management to create the proposal, including Phil Reynolds and Tom Berry from the Restructuring Advisory team and Jim Davies from Financial Advisory. Ben Larkin at Jones Day provided legal advice.

Phil Reynolds, Restructuring Advisory Partner at FRP, said: “The retail sector is continuing to feel the impact of the Covid-19 pandemic and the ongoing testing economic conditions that have made some business models unviable. This ruling shows how powerful Restructuring Plans can be in supporting companies experiencing financial distress and providing an alternative to a value destructive insolvency process. It also shows how important it is for leadership teams to act early and decisively when exploring restructuring options.

“This agreed proposal sets out a sustainable future for Clintons, enabling it to continue trading and retain the majority proportion of its high street presence. We wish the team all the best for the future.”