Playa Vista, Calif.-based, 250+-unit California Pizza Kitchen filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas on July 30, citing financial troubles due to the ongoing coronavirus pandemic. The restructuring agreement is meant to equitize the company’s long-term debt. During the restructuring period, the casual dining pizza chain will close unprofitable locations, reduce its long-term debt load, and “quickly emerge from bankruptcy as a much stronger company.”
“Today’s announcement is a step towards a stronger future for California Pizza Kitchen,” Jim Hyatt, CEO of California Pizza Kitchen said in a statement. “The unprecedented impact of COVID-19 on our operations certainly created additional challenges, but this agreement from our lenders demonstrates their commitment to CPK’s viability as an ongoing business. Throughout this process we will continue to deliver the same innovative, California-inspired cuisine that we have been serving for over 35 years.”
In accompanying court documents, Jim Hyatt explained that starting in February CPK pivoted from its usual in-store dining operations model to begin offering meal kits to consumers through its new “CPK Market,” in addition to temporarily closing 46 locations that were unable to pivot. The company also reduced corporate payroll by 35%. In April, the company took on a $30 million loan from outside lenders to take on its debt, and is currently seeking $46.8 million in debtor-in-possession financing.
“The company has just $13.5 million of cash on hand and has approximately four months of unpaid rent obligations at the majority of its locations, including numerous default notices from its landlords and court actions brought by CPK’s landlords to obtain this unpaid rent,” Hyatt said in the court documents. “The company has spent the past several months reviewing and negotiating strategic alternatives to obtain additional financing and address its capital structure and lease footprint in a holistic manner.”
Additionally, prior to filing for bankruptcy, California Pizza Kitchen had explored a potential sale, strategic merger, consolidation, or business combination in March and were in contact with many viable interested bidders. Although no agreement was reached, the company has asked for an auction in September with a bid deadline of September 11.
California Pizza Kitchen has been permanently closing underperforming locations across the country over the past month, including locations in Dallas and Frisco, Texas; Birmingham, Ala.; and East Cobb, Ga., in the Atlanta metro area.
Kirkland & Ellis is serving as legal counsel to California Pizza Kitchen; Guggenheim Securities, LLC is serving as the company’s financial advisor and investment banker; and Alvarez and Marsal, Inc. as its restructuring advisor.
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