Pizza Express has been in the news lately as it emerged that the landlord of one restaurant has served it with a winding up petition due to be heard in June. The company has 450 restaurants in the UK and 150 internationally.
However, the company has £655 million worth of debt – believed to be around £1.6m per eatery. It could therefore be argued that it is currently insolvent as it has no income and massive debts.
Houlihan Lokey Inc has been recently appointed to help with talks between Pizza Express and creditors.
In 2014, Hony Capital, the Chinese private equity firm, acquired the chain. Despite being popular, it appears not popular enough to escape the difficulties from the tough UK trading environment and rising costs in recent years.
In the second quarter of last year, the firm’s earnings had fallen by 11 per cent, with its debts rising almost 8 times, before tax and earnings. Across UK and Ireland, sales growth was limited at just 0.5 per cent.
However, sources close to the business have denied the rumours, stating that the company's directors aren’t "contemplating a Company Voluntary Arrangement (CVA)’ and are not ‘close to collapse’.
Whatever happens there will almost certainly be a painful restructuring for the company.
Pizza Express has been ordered to pay £465 million in secured bonds by August 2021, with the next repayment of £200 million in unsecured bonds, the following year.
In our view the collapse of Pizza Express is a distinct possibility given the current pandemic. The debt is going to have to be refinanced in 2 years time and it cannot pay the interest on its current loans. City sources are expecting the most likely outcome is a debt for equity swap. However, it is likely that in order to improve their cash position they may well try and get rent concessions from landlords. As the High Street suffers a big drop in spending then rents are likely to have to come down sooner rather than later and the larger firms such as Pizza Express will be in a strong position to get concessions.