Pizza Express lining up for painful debt restructuring | Business

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Pizza Express appears destined for a debt restructuring that could bruise its lenders, as sources with knowledge of the situation played down concerns it was in serious financial difficulty.

The pizza chain is reportedly in early talks to refinance two tranches of borrowing worth a combined £665m, part of a debt pile that had reached £1.1bn by the end of December 2018.

Pizza Express, which has not been immune to the deepening malaise in the casual dining sector, paid out £93m in interest payments in 2018, a year in which it reported a pre-tax loss of £55m loss, on sales of £543m.

About half of the interest payments are made to its Chinese parent company, Hony Capital. Founded in 1965, Pizza Express has 470 outlets in the UK, with a further 150 internationally and employs 14,000 people.

According to Bloomberg, the group has hired advisers ahead of talks with creditors who hold £465m of debt due for repayment in 2021 and £200m due the following year. Bondholders have also reportedly hired advisers to assist them in the discussions.

Both sets of bonds are trading at below the value at which they were issued, indicating doubts in the market that those who have lent to the company will get all of their money back.

The company’s performance has also deteriorated in line with the broader casual dining sector.

Earlier this year, Pizza Express said underlying profits fell 7.7% to £32.4m in the six months to the end of June. The chain opened only two new branches over the period and said the focus would be on improving existing sites and revamping its menu.

A spokesperson for Pizza Express declined to comment on debt talks.

But as reports of the discussions emerged, speculation mounted that the company could go the way of restaurant chains such as Jamie’s Italian, founded by the TV chef Jamie Oliver, which folded earlier this year.

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A source familiar with Pizza Express’s finances said it was not in danger of collapse and was also unlikely to pursue a company voluntary arrangement (CVA) like those agreed by rival Italian chains such as Prezzo and Carluccio’s.

The controversial form of financial restructuring typically involves store closures, job cuts and landlords having to agree to lower rents.

The source said Pizza Express had until 2021 to refinance its debts, adding that interest payments were being met by the group’s existing cashflow.


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