PizzaExpress to launch pasta delivery service in hunt for revenues

Chain’s private equity owners consider survival options including restaurant closures and debt-for-equity swap

PizzaExpress is planning to launch a pasta brand to bring in extra revenue amid negotiations over its large debt pile and the possible closure of some of its restaurants.

The chain’s owners, Chinese private equity firm Hony Capital, are considering options for its future, including a “company voluntary arrangement”, an administration process that would allow the business to reduce its costs by closing some of its 627 restaurants.

The company, which was bought by Hony in a £900m leveraged buyout in 2014, had £1.1bn of debt as of July last year and bondholders were already agitating for restructuring when coronavirus hit.

The UK government has suggested that restaurants could reopen on July 4, but an adviser to one group of PizzaExpress creditors said it was “unimaginable that they could reopen all their sites” and that the company was “moving towards a CVA”.

Earlier this month S&P, the rating agency, warned that the company was headed for a “comprehensive debt restructuring” after it announced a new £70m loan, due in March 2023, from the New York-based investment firm HPS to pay off £30m of debt that fell due in August.

Its other debts include £465m worth of senior secured notes due in August 2021, and £200m of unsecured notes due in August 2022.

Other restructuring options being considered by Houlihan Lokey, which is advising Hony Capital, include a debt-for-equity swap or a splitting of the group’s UK and Chinese businesses.

PizzaExpress declined to comment on the negotiations or on the new brand, which will be launched under a different name for delivery only in the next couple of weeks, according to two people close to the business.

The brand, which is similar to a takeaway pasta venture it launched in Singapore in 2018, will operate alongside PizzaExpress’s delivery partnership with Deliveroo.

Takeaways have been the one lifeline for restaurants whose revenues have collapsed as a result of the lockdown, but the competition is stiff.

Companies such as Shake Shack, Bone Daddies and Chopstix have expanded their delivery services in recent weeks.

Simon Stenning, an adviser to the hospitality sector, said PizzaExpress did well from selling pizzas in supermarkets — sales are higher than in its restaurants — because people recognised the brand. “Anyone can do a pizza but we buy supermarket PizzaExpress pizzas because we think they are better.” A separate pasta brand would not have that customer recognition, he said.

PizzaExpress, which reopened 13 of its restaurants for pizza delivery only this week, is aiming to avoid the fate of rival chains such as Carluccio’s, which was bought out of administration last week, and the Casual Dining Group, the company behind Bella Italia, which said on Friday that it was in talks with potential buyers after filing notice of its intent to appoint administrators two weeks ago.

This article has been updated to clarify that Casual Dining Group filed notice of its intent to appoint administrators two weeks ago.