The billionaire brothers behind Asda are said to be closing in on a takeover deal for Caffe Nero after buying up the ailing coffee chain’s debts.
Mohsin and Zuber Issa have bought roughly £140m of loans from Swiss private equity firm Partners Group via investment bank Morgan Stanley, the Sunday Telegraph reported.
The deal puts the tycoons in prime position to take control of Caffe Nero if the company were to default on its loans.
Sources told the newspaper that Partners Group had written to Caffe Nero boss Gary Ford warning that they were concerned about the state of the company’s finances.
The private equity firm is understood to have told Ford that the coffee shop was at risk of breaching its banking covenants and will struggle to refinance £145m of senior ranking debts that are due to be repaid next year.
In November Caffe Nero launched a company voluntary arrangement (CVA) to restructure the firm after a sharp downturn in trading caused by the pandemic.
The move was almost derailed by the Issas, who submitted a last-minute bid to buy the company outright. While the offer was rejected, the CVA remains subject to a legal challenge.
“We have had a successful winter and spring trading and are generating positive cash flow and are ahead of forecast for the last five months,” a Caffe Nero spokesperson said.
“We are forecasting no covenant issues in our projections over the next 12 months and we look forward to an even brighter future post May 17 when we open up our cafes fully to the public.”
The Blackburn-based Issa brothers made their fortune through their Euro Garages petrol station empire with private equity firm TDR Capital.
Regulators are this week due to issue their verdict on the pair’s £6.8bn acquisition of Asda.
Source: City A.M.
