(Reuters) - Restaurant Group Plc (L:RTN) said on Wednesday it would shut 125 outlets and cut rental costs in many more under a compromise deal with creditors that will mainly impact its Frankie and Benny's chain, sending shares up almost 6%.
A source familiar with the matter told Reuters last week that the closures, already flagged in other company releases and reports in the past few days, could affect up to 3,000 jobs across the UK.
The group, which operates over 650 restaurants and pubs across the UK, said earlier this week that casual dining was already facing significant challenges prior to the onset of COVID-19, including over capacity and high costs.
It said then that it had identified 210 outlets that were underperforming, on unfavourable lease terms or in some cases, not expected to generate future profitable returns.
Wednesday's statement said it had launched a company voluntary arrangement (CVA) for its leisure business which also included moves to exit about 25 previously closed sites and reduce rental costs and revise lease terms for 85 sites.
A CVA is a legal process that allows a company to reach compromises with some or all of its creditors and has been widely used by UK chains to close stores, reduce rents and change lease terms with landlords.
"We greet this news with cautious optimism, as successfully executed it may remove an investor concern at a fairly modest cost versus expectations," JP Morgan analysts said.
Shares in the company were up 5.8% in early trade.
British celebrity chef Jamie Oliver's restaurant chain went into administration last year leaving 1,000 people without jobs, due to brutal trading environment on Britain's high streets, while Carluccio's, Prezzo, Strada and Gourmet Burger Kitchen closed branches in 2018.
Restaurant Group reiterated that the restructuring will have no impact on its Wagamama noodle chain, airport concessions and pubs.