Pizza Express will close 73 UK restaurants, including sites in Bramhall and Glossop, after the company’s creditors agreed to a Creditors Voluntary Arrangement (CVA).
The move, which puts more than 1,000 jobs at risk, will allow the chain to reset leasehold obligations, meaning it could reduce its rent and outstanding arrears.
More than 89% of the company’s responding creditors agreed to the CVA – passing the 75% approval threshold. The agreement also passed the 50% threshold for unconnected creditors, with 67% approving the proposal.
Pizza Express had previously said that the CVA would help improve the operational performance of the restaurant chain. While most of its 454 UK outlets had been profitable over the last three years, earnings had been declining.
A reduction in revenue as a result of lockdown, along with additional costs involved in reopening and uncertainty about the UK’s economic recovery mean that the group’s rental cost base is no longer sustainable.
Zoe Bowley, Pizza Express’s managing director for the UK and Ireland, said: “Unfortunately, the impact of the global pandemic has meant that we have had to make some incredibly tough decisions to safeguard Pizza Express for the long term.”
A CVA is a legally binding repayment arrangement between an insolvent company and its creditors.
An Insolvency Practitioner will work out an arrangement covering the amount of debt to be repaid and a payment schedule. As a precondition, the company has to be making profits during the CVA.
This arrangement will be communicated to all of a company’s creditors and if 75% agree to it, then the company can continue trading in its current form.
If agreed, company directors can continue operating the company, but the CVA binds creditors into obeying certain rules including protections against debt collection.
A CVA is usually suitable if a business is fundamentally still viable, but the burden of debt is making it hard to operate.
For more information about CVAs and whether it might be suitable for your business, speak to an adviser today. Call: 0800 611 8888.