The owner of Pizza Hut restaurants in the UK will go ahead with plans to shut 29 sites, putting 450 jobs at risk, after creditors voted through an agreement to try to save the pandemic-hit business.
Pizza Hut Restaurants, the brand’s biggest franchise arm in the UK, has agreed a reduction in rent and bills with its landlords and other creditors through a company voluntary arrangement (CVA).
The CVA will not affect Pizza Hut’s delivery operations, which are operated separately. The UK restaurants are run under a franchise arrangement with Yum! Brands, the S&P 500 company that is also the owner of the KFC and the Mexican-themed Taco Bell chains.
What is a company voluntary arrangement?
A company facing financial difficulties prompted by heavy debts can apply for a company voluntary arrangement in order to avoid administration or other more disruptive forms of insolvency.
It is a legally binding insolvency process in which a company cuts a deal with creditors on unsecured debts. In retail, this usually involves asking landlords of poorly performing shops to reduce rental payments or allow the company to exit leases on stores which they would otherwise be bound to for long periods.
Companies hire an insolvency practitioner to assess the business and whether a CVA has a reasonable chance of success. They then produce a CVA proposal which may involve changes to the terms of leases or termination of onerous supply or employment contracts.
In order for a CVA to go ahead, the company must call a meeting of unsecured creditors, which may include suppliers and landlords. For the CVA to be approved, creditors who are owed at least 75% of the company’s total unsecured debt must vote in favour. At least 50% of creditors who voted for the CVA must not be connected to the company.
Once approved, the company can continue trading as usual and all unsecured creditors are bound by the deal, even those who voted against it or didn’t vote at all.
Creditors are often willing to support a CVA in the hope of recovering more cash than they would if the company went into administration or liquidation. They hope that reducing debts will help create a viable company that can continue to trade and pay them.
The process is popular with managers because they usually remain in charge of the company and it is cheaper than other forms of insolvency.
The closures will be spread across much of the UK, with branches in London, Glasgow and Cardiff among those affected. However, the deal will save the jobs of more than 5,000 workers, a spokeswoman said.
Pizza Hut Restaurants ran 244 branches across the UK before the coronavirus pandemic hit, employing 5,700 people. However, it was forced to shut all its restaurants during the UK’s lockdown and the sector has been forced to contend with further restrictions across the UK’s nations.
Many of Pizza Hut’s competitors in the casual dining sector have also pursued similar closures, including Pizza Express, Azzurri Group, the owner of Ask Italian and Zizzi, Carluccio’s and the Casual Dining Group, which owns Bella Italia, Café Rouge and Las Iguanas.
Pizza Hut Restaurants first hired advisers during the summer as it looked at options to restructure its debts despite saying that it had entered the lockdown in a “place of strength”.
A Pizza Hut Restaurants spokeswoman said: “We are delighted to have reached such a constructive position in partnership with our landlords and creditors.
“We appreciate the support of everyone involved and this outcome provides us with a strong platform to secure the long-term future of the business including over 5,000 jobs and over 200 restaurants.
“Our focus is now business as usual supporting all of our team members and continuing to provide a Covid-safe restaurant experience for our guests.”
Full list of Pizza Hut closures
Cambridge (Regent St)
Glasgow (Great Western retail park)
Maidenhead (Grenfell Island)
Oxford (George Street)
Dunstable (White Lion retail park)
Bury St Edmunds
Chelmsford (Moulsham St)
Leyton Mill, London E10
Sheffield (Penistone Rd)
Sheffield (High St)
Croydon (North End)
Maidstone (King St)
Gravesend (Imperial Park)
Brighton (city centre)
Cardiff (Culverhouse Cross)
Stratford, London E15
Source: Read Full Article