UK’s favourite pizza set to survive debt restructuring

Bloomberg

Twitter users following the #savepizzaexpress hashtag will probably get what they want, at least in part.
Creditors to troubled casual-dining group PizzaExpress Ltd, which has around $1.4 billion of debts, expect to see much of their money returned and the brand survive, according to analyst Helen Rodriguez at CreditSights in London.
“There’s a brand and a business for PizzaExpress, it just has the wrong balance sheet and needs to reduce its debt,” she said. “If it were to restructure, someone would certainly want to start again with the business.”
That will come as a relief to many in the UK, for whom the chain is something of a national icon. When Bloomberg reported that the company had hired advisers for talks with its creditors, it triggered an outpouring of emotion on social media from Britons who had grown up with the brand and feared its demise.
A representative for PizzaExpress declined to comment.
Bondholders are considering a company voluntary arrangement to close unprofitable restaurants, the Sunday Telegraph reported, citing a person it didn’t identify.
Lenders fear about 40% of PizzaExpress’s 470 UK outlets don’t make money, putting
more than 150 restaurants and about 3,300 jobs at risk, the newspaper said.
“I refuse to believe that anyone growing up in the UK can have passed through life without experiencing the marble table tops, blue glass vases and dough balls that define PizzaExpress,” fashion magazine Grazia wrote in a “love letter” to the chain.
Bond investors don’t believe it either. The most senior debt issued by the group that will be paid back first if the company flounders, is trading above 80% of face value. Even the junior bonds first in line for losses are still quoted at more than 20 pence on the pound, according to data compiled by Bloomberg.
That means investors think debt-restructuring talks are likely to yield a solution where lenders get some or even most of their money back.
A common outcome in restructurings is to pay off debt by converting it into shares, handing control of the company to creditors. Holders of PizzaExpress’s secured bonds will be in the driver’s seat when talks kick off, according to CreditSights’ Rodriguez.