Embattled Mexican chain Chilango has confirmed plans to launch a company voluntary arrangement (CVA) in a bid to secure its future.
City A.M. revealed yesterday that the chain was planning to launch a CVA – a controversial restructuring agreement that would allow it to re-open rent negotiations with landlords – as it battles cash-flow issues.
A Chilango spokesperson today confirmed that the company had “begun a process of engagement with its stakeholders with a plan to secure the future of the business”.
City A.M. understands that the company intends to file its CVA proposal tomorrow morning.
Chilango is proposing to enter a CVA to exit “non-trading leases” for dormant sites on which it had planned to develop restaurants and “restructure the company’s debt”, the spokesperson said.
Although the company did not confirm the number of leases it was looking to exit, the figure is understood to be around three dormant sites.
Chilango is in talks with restructuring firm RSM to shore up its business, and is over two months late posting its accounts on Companies House.
The CVA proposals would require the backing of the company’s creditors, which includes around 1,500 small investors who bought its mini-bonds, which Chilango dubbed burrito bonds.
“Together with a reduction in central costs, a successful CVA will materially improve the balance sheet,” said the spokesperson.
Launched in 2007, Chilango operates a dozen restaurants but has never turned a profit. The company reported a £1.4m loss for the year to March 2018, the most recent period for which figures are available.
Chilango co-founders Eric Partaker and Dan Houghton said the market in which Chilango operates had “changed significantly” in recent years.
“This proposal allows us to make important changes so we can support our stakeholders and continue serving our loyal guests. We are proud of the strong brand and passionate following our teams have created and look forward to the future.”