UK Chain PizzaExpress Proposes £1B Debt Reorg

By Rick Archer
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Law360 (September 8, 2020, 4:07 PM EDT) -- British restaurant chain PizzaExpress has announced that the impact of COVID-19 closures has sent it into a restructuring process that is slated to end with it shedding about £1 billion ($1.3 billion) in debt and dozens of U.K. locations.

In an announcement Monday, the casual dining chain said 89% of responding creditors supported the proposed arrangement in a vote taken Friday, over the required 75% approval threshold.

"The successful vote unlocks the company's ability to actively address the challenges brought by COVID-19, securing over 9,000 jobs in the U.K.," the company said. "Regrettably, the CVA [company voluntary arrangement] proposes the closure of 73 restaurants, putting 1,100 jobs at risk."

Founded in 1965, PizzaExpress currently operates 490 restaurants in the U.K. and Ireland as well as another 100 locations in 14 other countries, according to information posted on its website.

In 2014, the company was purchased by Chinese private equity firm Hony Capital for $1.54 billion.

In an August announcement of the CVA vote, PizzaExpress said adjusted earnings had been in decline for three years because of increasing costs before the company was hit with the disruption of the pandemic shutdowns in March.

"The unavoidable reduction in revenue as a result of the lockdown, combined with higher costs associated with reopening restaurants and uncertainty about the shape of the UK economy's recovery, mean that the group's rental cost base is no longer sustainable," it said.

The plan, as described by PizzaExpress bankruptcy counsel Kirkland & Ellis LLP in a Tuesday announcement, would provide the holders of £400 million in senior secured notes with new debt and equity in the restructured company, while the holders of £200 million in unsecured notes will receive equity, and £538 million in shareholders loans would be written off, it said.

The firm said the plan will also involve "rebasing" the company's U.K. real estate portfolio and lease obligations, which PizzaExpress said would involve rent reductions, a temporary move from quarterly to monthly rent payments and the closure of 73 U.K. locations.

The company noted in Monday's release that a majority of its landlords had voted for the plan on Friday.

The company will also divest its mainland China business to a Hony affiliate, it said

Kirkland said the plan is expected to get its hearing before the U.K. courts by Sept. 30 and would be effective by the end of October.

The firm noted this was the second plan filed under the new restructuring procedures in the Corporate Insolvency and Governance Act that went into effect in June. The first plan, proposed by Virgin Atlantic Airways, won court approval last week.

Clare Boardman and Daniel Butters of Deloitte LLP are the company's CVA supervisors, according to the Kirkland release.

PizzaExpress is represented by Sean Lacey, Elaine Nolan, Thomas Jemmett, Kon M. Asimacopoulos and William R. Burke of Kirkland & Ellis LLP.

--Editing by Gemma Horowitz.

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