Pizza Express faces tough debt decision

Global Italian restaurant chain Pizza Express may be broken up as its Chinese parent Hony Capital resists attempts to negotiate the restructuring of more than £1.1 billion debt.

According to Bloomberg, citing sources who asked not to be identified, investors who own 70 percent of the most senior-ranked bonds in Pizza Express have pledged to provide new funds to prop up the troubled chain. However, Hony, which paid £900 million for the company five years ago has yet to respond.

Saro Bos, an analyst at Imperial Capital, described Pizza Express’ capital structure as “unsustainable” in a research note to clients. “We expect the company will eventually have to restructure.”

Independent analyst Everest Research, has suggested a “sensible way” to restructure Pizza Express would be for the secured bondholders to take over the UK operations with Hony taking over the Chinese business – essentially a split in the operations.

According to Bloomberg, the bondholders see value in the business, particularly in the UK, where it started, which is achieving 18 percent more sales per store than those elsewhere in the world. Hony bought the business with a vision to expand into Greater China, but this has reportedly failed to deliver the level of returns expected.

The company recently closed its high-profile Hong Kong International Airport store but opened another in the Jewel Changi development in Singapore.

“Creditors are concerned that the expansion is draining cash from the business,” reported Bloomberg, citing a report by Imperial Capital.

Pizza Express’ debt begins to fall due in August next year.