Britain’s troubled PizzaExpress chain announced a rescue plan 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% of UK restaurants, putting 1,100 jobs at risk, according to a statement.
“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 LP, 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 pounds ($188 million) of fresh financing and the debt will more than halve to 319 million pounds.
The iconic PizzaExpress chain, born in London’s West End in the 1960s and ubiquitous in town centers 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.
The company is seeking to complete the restructuring of its balance sheet by November 15 at the latest, according to the statement.
It has hired Lazard Ltd to manage the sale of the company, seeking higher bids than the offer already made by the group of bondholders.
PizzaExpress’s 465 million pounds of senior-secured notes were little changed at 59 pence while the company’s 200 million pounds of lower-ranking bonds are quoted at just 3 pence on the pound.
Hony attempted to protect its holding in PizzaExpress last year by buying back part of the junior debt.