Firm Advises Ad Hoc Group of Senior Secured Noteholders on PizzaExpress Restructuring

Latham & Watkins has advised an ad hoc group of holders of senior secured notes issued by PizzaExpress on the successful completion of the Group’s financial and operational restructuring.

This complex transaction was implemented in part by way of an English law restructuring plan under Part 26A of the Companies Act 2006 (with parallel Chapter 15 recognition proceedings in the United States) and included a competitive M&A process culminating in the sale of the operating group to a newly incorporated holding structure majority-owned by the senior secured noteholders.

The transaction is only the second restructuring to be implemented via the new restructuring plan process since it was introduced into law by the UK parliament in June 2020. A restructuring plan is a court-based process that bears similarities to an English scheme of arrangement which enables a company to agree with its creditors and/or members (or any class of its creditors and/or members) a compromise or arrangement in respect of its debts and obligations owed to those creditors and/or members in a comprehensive manner. Any such plan must be approved by creditors and/or members representing at least 75% in value of each class of creditors and/or members present and voting at a creditors’ or members’ meeting. Even where there is a dissenting class, a restructuring plan may still be sanctioned if the court is satisfied that the dissenting class would be no worse off than in the relevant alternative to the restructuring plan (in this case an insolvent administration) and that at least 75% in value of a class of creditors and/or members with a genuine economic interest in the plan company in the relevant alternative has nevertheless approved it (a so-called ‘cross-class cram-down’).

The PizzaExpress restructuring plan was approved by an overwhelming majority of the Group’s senior secured noteholders. The restructuring plan effected the discharge of all liabilities in respect of both series of notes as well as intercompany liabilities in exchange for new debt securities and a majority equity stake in the new group structure in the case of the senior secured noteholders, and a minority equity stake in the new group structure in the case of the senior unsecured noteholders and the existing shareholder.

The transaction effected a deleveraging of over £1 billion of debt from the Group’s balance sheet and included a new money injection of up to £144 million to fund the Group’s operational turnaround and support its liquidity position against the backdrop of the COVID-19 pandemic and its impact on the casual dining and hospitality sectors. The new money providers also received an equity allocation in the new group structure.

In addition to its financial restructuring, the Group also undertook a parallel rebasing of the Group’s property portfolio and ongoing leasehold obligations via a company voluntary arrangement, which was approved by a majority of the Group’s landlords, and the disposal of the Group’s mainland China business, which was sold to the Group’s existing shareholder.

Latham teams across practices and offices in London and New York were led by London restructuring & special situations partners Yen Sum and Simon Baskerville and London counsel David Wallace, with associate Maria Holzhammer. Corporate and equity matters were led by London partner Huw Thomas with associates Maarten Overmars, James Thomson and Róisín Mbonu, while London partners Dan Maze and Francesco Lione and counsel William Lam, with associates Jason Britto, Chen Yang Sia, Taylor Mullings and Alex Gish, advised on finance aspects. London partner Deborah Kirk, with associate Elva Cullen, led on intellectual property aspects, while London partner Karl Mah and New York partner Jiyeon Lee-Lim, with London associates Aaron Bradley and Abi Jacobs and New York associate Anne McGinnis, advised on tax matters. London partner Catherine Drinnan, with associates Patrick Ritchie and Kendall Burnett, handled employment and incentive matters. Antitrust advice was provided by London partner Jonathan Parker and associate Alexandra Luchian.