Pizza Express has today announced that it is to undergo a financial and operational restructuring, which could see the permanent closure of 15% of its estate.

In agreement with its secured creditors and majority shareholder, Hony Capital, the business is set for a recapitalisation and restructuring transaction, intended to strengthen its position and provide funding for future growth.

The restructuring will see a significant de-leveraging of the group’s external debt, from £735 million to £319 million, an extension of maturities, and the potential transfer of majority ownership to its secured noteholders if a higher big is not provided by a third party.

Should a third party fail to provide such a bid, and holders of the senior secured notes acquire the business, individual holders will be entitled to receive shares (pro rate) in a new holding company of the group and £200 million 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 £144 million of committed new facilities, a resetting of the group’s UK leasehold obligations through a company voluntary arrangement (CVA), and a divestment of its mainland China business.

Of the £144 million new facilities, £70 million has been made available to support the re-opening of its UK estate and further strategic development, whilst the remaining £74 million is for utilisation in refinancing the group’s existing super senior debt facility, if required.

The group currently anticipates that its existing £70 million super senior credit facility will remain in place and mature on 30 April 2023.

Currently operating 449 restaurants across the UK – with 166 reopened since lockdown - the group has said that its upcoming CVA may result in the permanent closure of around 15% of its estate, with up to 1,100 jobs at risk.

Referring to this decision as ‘regrettable,’ the business added that it believes a reduction in the size of its estate is necessary to protect the majority of its employees long-term.

“Today’s agreement with our share and debt holders provides us with a significantly more robust balance sheet as well as material additional funding,” said CFO Andy Pellington. “It is a complete solution to our balance sheet issues and creates strong foundations to build on for future success.

“While we have had to make some very difficult decisions, none of which has been taken lightly, we are confident in the actions being taken to reduce the level of debt, create a more focused business and improve the operational performance, all of which puts us in a much stronger position.”

“While the financial restructuring is a positive step forward, at the same time we have had to make some really tough decisions,” added MD Zoe Bowley. “As a result, it is with a heavy heart that we expect to permanently close a proportion of our restaurants, losing valued team members in the process.

“This is incredibly sad for our PizzaExpress family and we will do everything we can to support our teams at this time.”

Houlihan Lokey EMEA, LLP and Kirkland & Ellis International LLP are advising the business in relation to the restructuring, and Lazard & Co. are advising it on the sale process.