Aug 8, 2019

PizzaExpress debt in the spotlight

The costs of insuring PizzaExpress debt against default has jumped to its highest level amid concerns over the chain's borrowing as it grapples with an increasingly difficult UK market and a costly overseas expansion. In its 2018 accounts it reported net debt of £1.1bn, with interest charges of £93.1m, resulting in a pre-tax loss of £55m. This high debt, which analysts say far exceeds the group's enterprise value, has raised fears over some of the less secure parts of its debt structure. That marks a sharp drop from the 80p that every £1 of debt was trading at a year ago and reflects investor concern whether all the group's debt would be repaid. The cost of protecting against PizzaExpress defaulting on its debt repayments has reached 67 percentage points upfront on five-year credit default swap contracts. In 2018, PizzaExpress opened 31 restaurants in China and Hong Kong, compared with seven new openings in the UK. Everest said that the investment overseas had increased net debt levels.

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