Pizzaexpress’s Chinese owner to inject more cash into UK chain

Hony Capital plans to buy back £80m of bonds in struggling high-street group

China’s Hony Capital is set to pump more money into Pizzaexpress, cutting the 54- year- old restaurant chain’s debts and increasing its chances of retaining control in any restructuring.

Fears for the future of the highstreet pizza group have emerged this year because of its high debt load and weak performance, with bondholders warning that Hony may be forced to give up ownership in any restructuring of its loans. The company has appointed advisers Houlihan Lokey and Kirkland & Ellis to explore options.

The Chinese private equity firm bought the pizza chain in a £900m leveraged buyout in 2014, saddling the group with debt at a time when the casual dining sector was beginning to suffer from oversupply and rising costs. On Wednesday, Pizzaexpress said it had no plans to shut any outlets in the UK, in spite of falling sales.

The company told bondholders that Hony planned to buy back £ 80m of its £ 200m unsecured bonds, which are trading at less than a quarter of their face value. Hony has offered to purchase the bonds at between 20 per cent and 40 per cent of the face value of the debt, according to a document seen by the Financial Times.

If successful, Hony would become the biggest holder of this “junior” debt in the group — which analysts had seen as likely to be wiped out in any restructuring — giving the Chinese firm a strong position in any negotiations with other bondholders. The company has £665m of bonds outstanding, of which the secured £465m matures in August 2021 and the unsecured £200m in August 2022.

The company could use the stake to avoid going through a debt-for-equity swap in which it would lose control of the business, said one high-yield bond fund manager. “If they are willing to pay then they can recreate control — it’s messy but it can be done.”

One person briefed on the situation said the plan to buy back a chunk of the bonds showed that Hony saw more value in the chain than some investors, with its planned acquisition of a large stake in the weakest part of the company’s capital structure. “It will also surprise some that Hony even has the money to do so,” he added.