PizzaExpress to shut scores of outlets, overhaul debt

[LONDON] Britain's troubled PizzaExpress chain announced a rescue plan on Tuesday that's likely to close scores of restaurants, put hundreds of pizza chefs and waiters out of work and hand control of the business to creditors.

As part of the proposals, the company will implement a legal process known as a company voluntary arrangement that may permanently close about 15 per cent of UK restaurants, putting 1,100 jobs at risk, according to a statement on Tuesday.

"This decision is a very difficult one," the company said. "However, against the current unprecedented backdrop, PizzaExpress believes reducing the size of its estate will help it to protect 9,000 jobs."

The agreement marks an end to a months-long standoff between Hony Capital, the company's owner since 2014, and a group of PizzaExpress's senior-secured bondholders including US firms Cyrus Capital Partners, HIG Bayside Capital and Bain Capital Credit.

Bondholders will take ownership of the majority of the business if no higher bid is received, while Hony will keep the Chinese operations. In return, the bondholders will provide PizzaExpress with as much as £144 million (S$258.5 million) of fresh financing and the debt will more than halve to £319 million.

The iconic PizzaExpress chain, born in London's West End in the 1960s and ubiquitous in town centres across the UK, has been hit by changing consumer habits in its home market at the same time as having to shoulder the financial burden of Hony's plans to expand the brand overseas. The company was already struggling under its debt pile before the coronavirus pandemic forced it to close restaurants in March.

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The company is seeking to complete the restructuring of its balance sheet by Nov 15 at the latest, according to the statement. It has hired Lazard to manage the sale of the company, seeking higher bids than the offer already made by the group of bondholders.

PizzaExpress's £465 million of senior-secured notes were little changed at 59 pence on Tuesday while the company's £200 million of lower-ranking bonds are quoted at just three pence on the pound.

Hony attempted to protect its holding in PizzaExpress last year by buying back part of the junior debt. But lockdown measures to halt the spread of Covid-19, coupled with a deadline to pay bond interest, hastened restructuring negotiations. The roughly £20 million of bond interest that came due July 31 wasn't paid and has been added to the debt pile, according to Tuesday's statement.

"Cash burn during recent months means that the need for fresh liquidity is vital," said David Beadle, vice-president at ratings firm Moody's Investors Service. "The prospect of a restructuring of the company's highly leveraged balance sheet had been increasing even before the forced closure of its estate during lockdown."

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