Kirkland Advises PizzaExpress on Successful Restructuring Plan, Company Voluntary Arrangement

Kirkland & Ellis is advising PizzaExpress group, the leading casual dining chain, on its successful restructuring via a restructuring plan (under the new Part 26A of the UK Companies Act 2006) and, in parallel, a company voluntary arrangement. 

The restructuring plan of PizzaExpress Financing 2 plc (the Plan) was sanctioned on 29 October, following the convening hearing on 30 September and plan meetings on 21 October. Recognition of the Plan was successfully obtained under Chapter 15 of the U.S. Bankruptcy Code on 3 November from Judge Isgur of the U.S. Bankruptcy Court for the Southern District of Texas. The restructuring effective date occurred on 5 November 2020.

The Plan is only the second restructuring plan to be launched, following the introduction of the procedure at the end of June. For further information on the reforms, see our Alert. The first restructuring plan, of Virgin Atlantic Airways, was sanctioned on 2 September; Kirkland & Ellis advised the Civil Aviation Authority as regulator and contingent creditor. For further information on Virgin’s plan, see our Alert. 

Prior to the COVID-19 pandemic, PizzaExpress operated 449 sites across the UK, 19 restaurants in Ireland and a number of restaurants internationally including in Hong Kong, Singapore and the UAE. Its business has been severely impacted by the ongoing pandemic. 

The Plan effects a major financial recapitalisation and restructuring transaction involving a de-leveraging of the Group by a reduction of its total indebtedness by c.£1 billion (comprising a reduction of its external debt from £735 million to £319 million and a write-off of shareholder loans of c.£538 million) and extension of debt maturities to 2025, the provision of new money funding of c.£144 million and a CVA to effect an operational restructuring of its leasehold liabilities. 

The Plan involved three classes of plan participants for voting purposes: holders of £465 million senior secured notes, holders of £200 million senior unsecured notes, and the shareholder of the plan company. At the plan meetings, 100% of those voting, in each class, approved the Plan, with very high turnout in each class. Accordingly, although the Plan was launched in full contemplation of effecting a “cross-class cram down” (whereby a restructuring plan can be sanctioned notwithstanding the dissent of one or more stakeholder classes), it was ultimately unnecessary to ask the Court to exercise this new power. 

The Plan gives holders of the senior secured notes new debt instruments and majority ownership in the restructured group, facilitates the provision of c.£144 million of new financing in respect of which lenders will also receive a substantial equity allocation, and gives holders of the senior unsecured notes and former shareholders each a minority equity allocation in the restructured group. The Group utilised c.£40 million of the new money funding at completion.

The CVA in respect of PizzaExpress (Restaurants) Limited (PERL) was overwhelmingly approved on 4 September, by over 89% of creditors voting, and by PERL’s shareholder. The CVA involves rebasing PERL’s property portfolio and ongoing leasehold obligations, across seven categories, throughout England, Wales, Scotland and Northern Ireland. The CVA also compromises certain other liabilities, including specific contingent and historic liabilities and intra-group liabilities. 

The Kirkland team is led by London restructuring partners Sean Lacey, Elaine Nolan, Thomas Jemmett and Kon Asimacopoulos and capital markets partner William Burke, and includes lawyers across our market-leading restructuring, capital markets, tax, litigation, corporate and intellectual property groups. U.S. restructuring partner David Seligman and associate Ciara Foster led on the Chapter 15 recognition process. The CVA supervisors are Clare Boardman and Daniel Butters of Deloitte LLP.