PizzaExpress formally launches CVA with 73 sites set to close
The move will see 73 restaurants in the group's 449-strong UK estate closed permanently, including its debut site on London's Wardour Street, which was opened by founder Peter Boizot back in 1965.
In total 1,100 jobs will be impacted by the closures.
Under the CVA there will also be a resetting of the group’s UK leasehold obligations, which it hopes to achieve through a combination of reduction in outstanding arrears, reduced rental agreements, a temporary move from quarterly to monthly rents and other measures.
PizzaExpress says the CVA is intended to improve the operational performance of the business against the backdrop of a challenging trading performance; difficult market conditions caused by the Covid-19 crisis; and the effect of lockdown measures upon its restaurants.
The proposal is part of the wider holistic recapitalisation and restructuring transaction that was set out by the group earlier this month.
This restructuring will see a significant de-leveraging of the group’s external debt, from £735m to £319m; an extension of maturities; and the potential transfer of majority ownership to its secured noteholders if a higher bid is not provided by a third party.
PizzaExpress previously announced it had engaged Lazard & Co to advise it on a sale process and to help identify third party interest in an acquisition of the group.
Should a third party fail to provide such a bid, the holders of the senior secured notes will acquire the business, with individual holders will be entitled to receive shares (pro rate) in a new holding company of the group and £200m of new senior secured notes, due in 2025.
As a result, the transaction will involve a change of ownership and the existing shareholders will be entitled to receive a minority equity position in the new holding company.
The process will also include a major recapitalisation, with the provision of up to £144m of committed new facilities, £70m of which will be used to support the re-opening of its UK estate and further strategic development, with the remaining £74m available for utilisation in refinancing the group’s existing super senior debt facility, if required.
The group currently anticipates that its existing £70m super-senior credit facility will remain in place and mature on 30 April 2023.
There will also be a divestment of the group’s mainland China business to an affiliate of Hony Capital.
Although PizzaExpress says the majority of its estate was trading profitably before lockdown, EBITDA across the estate had been declining for the last three years.
It adds that 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.
“The announcement of the CVA proposal follows a period of constructive dialogue with the British Property Federation and a broad range of our landlords," says PizzaExpress MD Zoe Bowley.
"We have taken onboard their feedback and accommodated their requests as far as possible.
“Unfortunately, the impact of the global pandemic has meant that we have had to make some incredibly tough decisions to safeguard PizzaExpress for the long term.
"Today we have confirmed that 73 of our pizzerias are proposed to close permanently.
"In most cases, there is another PizzaExpress nearby, either already open or reopening soon, to welcome our customers.
"Our focus is on our people whose jobs are impacted and we will be doing everything we can either to redeploy them or to support them in finding roles elsewhere.
"Hard as this process is, it will protect the jobs of over 9,000 of our colleagues and provide a strong footing for PizzaExpress to meet future challenges and opportunities.”
PizzaExpress will seek approval of the CVA proposals from its creditors by way of a virtual meeting on 4 September 2020.
Clare Boardman and Daniel Butters of Deloitte LLP have been appointed as nominees to the CVA.
