Lord Sugar joins efforts to block rescue deal for struggling Caffe Nero

Sir Alan Sugar's firm Amsprop has joined a landlord-led legal fight against Caffe Nero's rescue deal, Sky News has reported.

The apprentice star, who founded Amsprop Investments is among seven parties which have lodged a legal challenge aimed at blocking Caffe Nero's company voluntary arrangement (CVA).

Sugar’s involvement in the legal revolt, which is thought to have been filed on Christmas Eve will intensify scrutiny of a restructuring plan that affects the fate of thousands of high street employees.

In November, Caffe Nero launched a CVA as part of a restructuring plan after COVID-19 and the second lockdown in England pushed it into a corner. The coffee chain, which employs 6,000 workers, said "the pandemic has decimated trading.”

Caffe Nero’s founder and chief executive, Gerry Ford, said at the time that it was “imperative” that the business take steps to reduce pressure, as its cafes were forced to close for a second time.

The chain’s CVA was approved by creditors last month, and will be implemented unless the challenge is successful.

Founded in 1997 by Ford, it has expanded into 11 different countries, with a total of 1,000 stores. Caffe Nero owns 800 stores in the UK.

A CVA is a formal agreement between a business and its creditors which gives firms the chance of recovery.

It sets out how repayments of company debts should be made to creditors and can deliver a better outcome than an administration or liquidation. After 14 days creditors are asked to vote and at least 75% must agree.

READ MORE: Caffe Nero launches CVA as second lockdown 'decimates trading'

Under the plans, Ford, who has a controlling share, pledged £5m to a “survival fund” aimed at combating any renewed escalation of COVID-19 as it braces itself for a legal challenge from landlords.

The CVA would see landlords forfeit most of their outstanding rent payments — a move which has angered commercial property owners who have seen their businesses hammered by COVID-19.

But, landlords were promised full payment of rent arrears as part of a takeover offer proposed just before December's CVA vote by EG Group, the petrol station empire run by billionaire brothers Mohsin and Zuber Issa. The Lancashire-based pair bought Asda from Walmart (WMT) in a £6.8bn deal.

The landlords who were contesting the restructuring were largely “mom and pop” property owners who would not have the resources to fund a significant legal fight, a source told Sky News.

A Caffe Nero spokesman said: "We are aware a challenge has been filed by a small number of landlords at what appears to be the instigation of a third party.

"We still firmly believe the terms of the CVA, which passed with over 90% support, are in the best interests of all our creditors and we will openly engage with any landlord who wishes to discuss it further.

"We intend to defend the challenge vigorously.

"In the meantime, we remain focussed on managing the business through the current COVID-19 enforced trading restrictions, and re-growing our sales in the months and years ahead."

Caffe Nero is part of a long line of high street companies which have turned to insolvency specialists to avoid complete collapse.

Retailers including New Look, Jigsaw and Edinburgh Woollen Mill have all used insolvency processes to reduce debts as struggling stores buckled under the pandemic pressures and restrictions on high streets.

Restaurants and bars have also turned to CVAs. Pizza Express, Pizza Hut and Revolution Bars have all used the insolvency tool.

Watch: Why job losses have risen despite the economy reopening