FRP Advisory helps Prezzo secure restructuring plan

A multi-disciplinary team at FRP Advisory has provided financial advice to Italian restaurant company Prezzo.

Thanks to support from specialist business advisory firm, FRP Advisory, Prezzo has become the first mid-market company to successfully secure a restructuring plan in the face of a challenge by HMRC.

The casual dining chain 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 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”.

Reynolds 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 tools when looking at how best to restructure a business.”