Pizza Express has formally launched a CVA in a bid to reduce its restaurant estate and rental cost base following the pandemic.
The CVA proposal will see the permanent closure of 73 restaurants, resulting in a loss of 1,100 jobs.
The casual dining chain first announced it had reached an agreement with its secured creditors and majority shareholder, Hony Capital, for a recapitalisation and restructuring transaction earlier this month.
In its previous update, the group said it planned to launch a CVA “in the near future” following an extensive review of its operations, but expressed that 67 sites could be at risk of closure at the time.
In its latest update, the group said the decision to launch a CVA was made as EBITDA across its estate has been in decline for the last three years, despite trading “profitably” before lockdown.
In addition, the Covid-19 crisis caused “significant disruption” to the casual dining sector and group, leading to an “unavoidable” reduction in revenue following lockdown.
Combined with higher costs, as well as future uncertainty over the state of the economy, Pizza Express has concluded that its rental cost base is “no longer sustainable”.
The proposed CVA is designed to “reset” its leasehold obligations and allow for a
“smaller and better-invested” UK restaurant estate, while reducing outstanding arrears and rental agreements. It will also move from quarterly to monthly rents, alongside other measures.
In addition to the CVA and resulting closures, an ongoing competitive sale process is also underway for the group. The process commenced on 4 August and is being led by Lazard and Co.
Zoe Bowley, UK&I managing director, said: “The announcement of the CVA proposal today follows a period of constructive dialogue with the British Property Federation and a broad range of our landlords.
“Unfortunately, the impact of the global pandemic has meant that we have had to make some incredibly tough decisions to safeguard PizzaExpress for the long term. Today we have confirmed that 73 of our pizzerias are proposed to close permanently.”
She added: “In most cases, there is another PizzaExpress nearby, either already open or reopening soon, to welcome our customers. Our focus is on our people whose jobs are impacted and we will be doing everything we can either to redeploy them or to support them in finding roles elsewhere.”