Restaurant chain Leon serves up two-year restructuring to creditors

Leon, one of Britain’s most prominent restaurant chains, has served creditors with a restructuring plan that includes a multimillion pound investment from shareholders to secure its future.

Sky News has learnt that the company, which was co-founded by Boris Johnson‘s ‘food tsar’, Henry Dimbleby, circulated details of a company voluntary arrangement (CVA) to landlords and lenders on Tuesday.

The proposals, which require creditor approval, would see four of Leon’s restaurants switch to a rent-free model.

The majority of its 60 outlets will switch to turnover-based rents – an increasingly common framework for coronavirus-battered hospitality and retail businesses.

A deluge of CVAs have, however, sparked a backlash from commercial landlords, with the British Property Federation accusing operators of “weaponising” the insolvency mechanism.

Melanie Leech, the BPF chief executive, said that Leon and Quantuma, its CVA supervisor, had engaged with it in recent weeks.

“This has provided us an opportunity to improve understanding of property owners’ interests and concerns, but ultimately it will be for individual property owners to decide how they will vote on the CVA,” she said.

Crucially, the Leon CVA will be in place for two years, unlike many three-year restructurings drawn up by rivals.

Leon is known for its “naturally fast food”, and had drawn up plans to open dozens more sites before the coronavirus outbreak.

John Vincent, the chain’s co-founder and current boss, said: “In common with the whole hospitality sector, the past nine months have been the most difficult in Leon’s 16-year history.

“We started the year as a profitable and growing business but the effects of the repeated lockdowns and tier restrictions have made our current business model untenable.

“We have also engaged extensively with the vast majority of our landlords across the last few months.”

He said the company had “a duty to secure Leon’s future for the benefit of all our stakeholders and, after careful reflection, believe this CVA is the best way of doing that”.

“It will give the business the breathing space it needs before it can fully resume normal trading and look to grow again.”

Sources said the CVA would not directly trigger any store closures or job losses among Leon’s 650-strong workforce.

As part of the restructuring, Leon’s shareholders will inject £3m into the company if its cash reserves fall below £2.25m for more than 28 consecutive days.

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