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PizzaExpress Owner Strengthens its Hand Against Firm’s Creditors

Katie Linsell and Luca Casiraghi
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PizzaExpress Owner Strengthens its Hand Against Firm’s Creditors

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PizzaExpress Ltd.’s Chinese owner is set to become one of its biggest individual creditors, giving it a stronger hand in any battle to overhaul the struggling U.K. restaurant chain.

Hony Capital, the private equity group that bought PizzaExpress in 2014, has secured a controlling majority of its unsecured bonds, according to a document seen by Bloomberg. That means a group of bondholders seeking to lure Hony into talks about ways to prop up the restaurant group will face a far more powerful rival across the negotiating table wielding influence as both owner and lender.

Hony has already snubbed an offer of funding from the investor group who see value in the company, especially in its U.K. operations.

Hony will buy 80 million pounds ($103 million) of PizzaExpress’s unsecured bonds on Dec. 12, the maximum target it set in a tender offer launched earlier this month, according to the document. That’s enough for a majority holding when combined with about 23 million pounds Hony already owns.

A spokesman for PizzaExpress declined to comment on the tender. Hony representatives couldn’t be reached outside of regular office hours.

Holding the bulk of the bonds gives Hony “important negotiating leverage in the event of restructuring talks,” Moody’s Investors Service wrote in a note to clients this week. The ratings firm called the offer “an aggressive financial policy.”

PizzaExpress, an iconic brand in Britain, is under pressure from investors over its 1.1 billion pounds of debt while Hony’s plans to expand the brand in China have strained its finances further.

Its performance is flagging amid changing consumer habits that have decimated Britain’s retail and leisure industries. The malaise has seen some high-profile victims including travel agent Thomas Cook which collapsed in September.

PizzaExpress is currently in the headlines after it was name-dropped by Prince Andrew in a disastrous television interview about his friendship with pedophile financier Jeffrey Epstein.

PizzaExpress only has one director that is independent of Hony and advisers “are likely to be particularly focused on the interests of shareholders, to the potential detriment of other stakeholders,” Moody’s said this week.

Hony is buying the notes at a steep discount of 40 pence on the pound. That means it will only pay about 32 million pounds to buy 80 million pounds of bonds.

Holders offered up about 93 million pounds of bonds to Hony by the initial deadline of Nov. 20, according to the document. The notes are currently quoted at a deeply distressed price of about 26 pence.

To contact the reporters on this story: Katie Linsell in London at klinsell@bloomberg.net;Luca Casiraghi in London at lcasiraghi@bloomberg.net

To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, Chris Vellacott

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