Caffe Nero, the fast-growing coffee retailer widely believed to have entered talks with Coffee Republic regarding a takeover, announced today that it has secured an extra £7 million facility from Royal Bank of Scotland. This takes its 'funds available for growth' to £10 million. Leslie Copeland reports.

Caffe Nero chairman Gerry Ford refused to be drawn on whether this cash will be used to fund a bid for a rival operator. He merely said that the funds would be used to grow the business.

Ford also remains circumspect on why his company has built a substantial stake in Coffee Republic (following a further bout of buying, its stake has risen to 10.69 per cent), saying 'we don't know what are intentions are'.

Most observers believe a deal is likely to be announced sooner rather than later, the only outstanding issue being the price Caffe Nero is willing to play.

On the trading front, Caffe Nero continues to make good progress. Despite a tough environment, trading at its chain of 108 stores is in line with expectations, and actually above that recorded last year. Unlike some operators, the group has recorded 'stable growth' in the very competitive London market.

Cafe Nero's shares today jumped 1p on the news. Coffee Republic remained unchanged at 4.5p.