S&P upgrades PizzaExpress

S&P said it upgraded PizzaExpress to CCC- from SD and the rating on the company’s senior unsecured notes to C from D.

PizzaExpress sponsor Hony Capital completed a tender offer on 36% of the unsecured notes. It acquired £71.9 million of the £200 million unsecured notes due in August 2022 at a 60% discount to their par value. Although Hony Capital’s stake in the unsecured notes is material, S&P said it understands the financial sponsor does not have a majority stake.

Hony Capital hasn’t committed to cancelling the bonds acquired or transferring them to PizzaExpress. “Doing so could have alleviated the group of some of its large outstanding debt burden. The cancellation of the unsecured notes purchased by Hony Capital could have also improved the group’s liquidity position and interest cover metrics, as cash interest payments would have reduced by £6.2 million per year,” said S&P in a press release.

Hony Capital’s recent tender offer has not changed S&P’s view of the group’s capital structure, which the agency continues to see as unsustainable.

S&P views PizzaExpress’ liquidity as adequate because the group maintains availability under its revolver and reported £20 million cash on its balance sheet, said S&P.

The outlook is negative.

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