California Pizza Kitchen announced Thursday that it had emerged from bankruptcy after eliminating $225 million in debt.
The plan was approved by a federal court in Texas.
According to the restaurant, which entered bankruptcy with roughly 200 stores systemwide, the restructuring plan was the result of months of negotiations with lenders that received nearly unanimous support. CPK is now saddled with $177 million in debt, including exit financing to support the business. The restaurant entered bankruptcy with roughly $400 million in debt. Additionally, debt maturities were extended to 2024 and CPK was able to negotiate rent concessions for a majority of its leases.
Under the plan, 96.5 percent of the brand’s equity will be given to first-lien lenders, according to Law360. The remaining portion and $1.75 million in cash will split among unsecured creditors.
“We are pleased to have completed this process rapidly and thank our guests, franchise partners, employees and vendor partners for their continued support,” said Jim Hyatt, CEO of CPK, in a statement. “Looking ahead we are focused on delivering our innovative, California-inspired cuisine to our CPK guests safely and accelerating the momentum we have created in our off-premises business during COVID. We are energized by the opportunity ahead of us and look forward to this new phase of growth.”
Before declaring bankruptcy, CPK closed 17 company stores in the U.S. because of COVID and lease-related challenges, and closed eight more during the court proceedings. No additional closures are planned.
As part of its restructuring plan, CPK’s other option was to sell its assets, a process it had explored before the crisis. However, bankruptcy documents show no party submitted a qualified bid by the deadline.
Before the COVID pandemic, CPK was faced with increased competition from fast casuals and the rise of third-party delivery providers. It was also suffering from the continual decrease of mall traffic. The restaurant hired a new management team to implement a multi-year turnaround strategy, and in the fall of 2019, the chain hired a company to explore M&A and restructuring transactions.
A sale process was soon initiated, but it was interrupted by the pandemic. In the final week of March, weekly net sales were $2.5 million, a 77 percent drop compared to 2019. At the time, CPK closed 46 units that couldn’t operate via off-premises. Because of the dire financial situation, the restaurant received a $30 million bridge loan, but those funds were used up by July. The brand only had $13.5 million of cash on hand and roughly four months of unpaid rent obligations at most locations.
During the pandemic, CPK utilized web-based delivery and relationships with Uber Eats, Grubhub, Postmates, and DoorDash in its pivot to off-premises only. It also created CPK Market, a way for customers to purchase traditional menu items and grocery items. Pre-COVID, dine-in represented 78 percent of the business.