BLM Insolvency Law Partner Stuart Evans unpicks Pizza Express’ latest woes

BLM Insolvency Law Partner Stuart Evans unpicks Pizza Express’ latest woes

According to media reports, high-street food chain Pizza Express is considering the closure of 67 outlets and cutting 1,100 jobs across the UK.

Is Covid-19 to blame for Pizza Express' current position?

From an insolvency perspective, Pizza Express’ debt problems pre-dated Covid 19. The pandemic has merely exacerbated them, as it has for many high-street food chains, like Carluccio’s, which ended up in administration. Pizza Express is said to owe more than £1 billion and has been looking to restructure that debt.  The government’s “Eat Out to Help Out” scheme, designed as a post-Covid- fillip for the restaurant sector, simply isn’t going to solve that particular problem in a meaningful way.

What are the commercial options are available to Pizza Express?

According to a BBC report, Pizza Express may be looking to reach an agreement with creditors through a Company Voluntary Arrangement.

- What is a CVA?

For the uninitiated, that’s a supervised procedure that can help a company to address its financial difficulties. Essentially it’s a compromise, or other arrangement, between a company and its creditors. For Pizza Express, it may if eligible look to  combine the option of a CVA with a statutory moratorium.

- What is a statutory moratorium?

That’s a mechanism that would protect Pizza Express from creditor action for a short period of time whilst it finalised its plans for a CVA. It’s breathing space courtesy of legislation.

The CVA, if approved, will contain a compromise of creditor claims and possibly terms for new trading arrangements with certain creditors, with dividends to be paid to creditors as the business trades on following its approval. To get it through, Pizza Express as the debtor, would need, amongst other requirements, the vote of 75% in value of all creditors. The choice facing such creditors will be do you want to agree to take no action against the business and possibly to new terms of business, in return for a dividend which is dependent on the business meeting the objectives of the CVA, or get a lower or nil dividend if the business goes into a more terminal process such as liquidation? For creditors such as landlords owed rent and looking to claw back deficits in the “new normal”, it’s a stark choice, not least because not all CVAs succeed.

What other alternatives beyond CVA may Pizza Express have?

An alternative available to Pizza Express to consider is administration, which may also involve a CVA proposal but which could also involve the sale of the Pizza Express business, or parts of it to a third party. To quote an earlier example, some of Carluccio’s restaurants are now under new ownership.

We now have news that Pizza Express has itself put up its UK business for sale, to run alongside a CVA. It will be interesting to see the level of interest that gets and whether any offers match the owners’ expectations.

What may lie ahead for Pizza Express'?

The owners of Pizza Express are clearly facing some very tough decisions, and we will have to see what their advisers recommend as the best course to take in the midst of this developing situation. Let’s hope we will still be tucking in to dough balls and Calabrese for many years to come.

 

If your business is affected by any of the issues raised here and you would like to have a confidential discussion with BLM, then do not hesitate to contact me directly.

 

 

Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to customers of BLM. Specialist legal advice should always be sought in any particular case.

Who to contact

Stuart
Evans

Partner , London

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