Moody’s downgrades PizzaExpress notes

Moody’s Investors Service said it downgraded the rating of the £465 million senior secured notes issued by PizzaExpress Financing 2 plc due August 2021 to Ca from Caa3. The Ca long-term corporate family rating and Ca-PD probability of default rating of PizzaExpress Financing 1 plc and the C rating of the company’s £200 million senior unsecured notes due August 2022 are unaffected. The outlook remains negative.

“Today’s rating action follows the announcement by the company on August 4 that it has received support from its principal shareholder, Hony Capital, and holders representing more than 75% by value of the SSNs to a proposed balance sheet restructuring,” Moody’s said in a press release.

The terms include a debt for equity swap in respect of the senior secured notes, under which the debt claim will be reduced to £200 million, 43% of the outstanding balance. “Moody’s considers a Ca rating of the SSN s is commensurate with this recovery level,” the agency said.

Moody’s said it considers the CFR and PDR of Ca and Ca-PD respectively appropriate for the overall recovery prospects, as the proposed restructuring includes a full equitization of the senior unsecured notes, but no change in terms for the £70 million super senior term loan or full repayment of this facility.

The restructuring proposal includes new money of up to £60 million, net of fees and original issue discount, which will support the company’s liquidity, the agency said. The providers of the new money have also agreed to refinance the super senior term loan if the lenders of that facility require repayment as a consequence of the restructuring.

The proposed restructuring depends on a successful company voluntary arrangement under which the company will propose either rent reductions or closures of some restaurants, Moody’s said.

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