Pizza Express has been in the news as it emerged that the restaurant chain has hired advisors ahead of talks with creditors. 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. Langton Capital Limited tweeted out about the news, highlighting the amount of debt the company was in and the approximate debt per restaurant.
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 the second quarter of the 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.
These half year results were described by the group's chairman, Jinlong Wang as pleasing: ‘’In the first half of the year, we are pleased that we have remained resilient across all our markets despite sector-wide challenges.’’
Looking through social media, there is much sadness being expressed over the thoughts of the chain collapsing.
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’.
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 any time soon is extremely unlikely. The debt is going to have to be refinanced in 2 years time and, given the current worries of high level of indebtness in large businesses, it makes perfect sense to have talks with creditors. 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.