California Pizza Kitchen is deciding whether to pursue a sale or IPO, according to Bloomberg.
The pizza chain is thinking about the options as it hopes to refinance $177 million of debt left on its balance sheet after exiting bankruptcy in November 2020. The brand hired Guggenheim Partners to advise the refinancing process, which is the same firm that helped the company through bankruptcy.
A source told Bloomberg that California Pizza Kitchen’s goal is to reduce debt ahead of a sale to a “strategic party” or an IPO—a move driven by rising sales and the return to full capacity in California. The Golden State removed restrictions and a statewide mask mandate on June 15 after serving as one of the most restrictive states in the country. The timing of the refinancing hasn’t been decided, but the media outlet said it could start in the next few weeks. California Pizza Kitchen was bought by Golden Gate Capital in 2011 for $470 million.
The concept was founded in Beverly Hills in 1985 by former federal prosecutors Rick Rosenfield and Larry Flax. California Pizza Kitchen now has nearly 200 restaurants worldwide across 12 international cities, eight countries, and U.S. territories.
The chain filed bankruptcy in July 2020 after facing overwhelming pressure from COVID. Entering the pandemic, dine-in sales represented 78 percent of business. So when dining rooms shut down nationwide, weekly net sales dropped roughly 77 percent year-over-year to $2.5 million in the final week of March. Also, nearly 50 stores had to close because they weren’t built for off-premises.
However, COVID only exacerbated issues that were already occurring. In court documents, California Pizza Kitchen blamed its bankruptcy on the rise of fast casual, decreasing mall traffic, and the growth of third-party delivery services. Pre-pandemic, the company faced liquidity problems for multiple years and hired a management team to trigger a turnaround effort. In the fall of 2019, the brand began exploring M&A and even initiated a marketing process to sell itself, but COVID halted those efforts.
As part of its bankruptcy restructuring, California Pizza Kitchen completed a debt-for-equity transaction and eliminated more than $220 million in existing funded debt. Substantially all of California Pizza Kitchen’s equity is now held by CPK’s prepetition lenders.
Bloomberg reported that California Pizza Kitchen’s average weekly sales are around $10 million, which is up from $8 million and $9 million in April and May, respectively. Annualized earnings are projected to push past $60 million in June, versus $50 million before pandemic.
The IPO field gets deeper as the weeks go on. Krispy Kreme rejoined the stock market July 1 after being public from 2000 to 2016. Other quick-service chains that have filed to go public are Sweetgreen, Dutch Bros Coffee, and Portillo’s. Private equity firm L Catterton, the owner of bartaco and Barcelona Wine Bar, and P.F. Chang’s are also reportedly looking to file an IPO. On the fast casual side, Torchy’s Tacos and Panera have both been linked to potential IPOs, as well.
In February, Fertitta Entertainment, which includes Golden Nugget Casinos and Landry’s, agreed to join special acquisition company Fast Acquisition Corp. and go public in a deal that will value the company at $8.6 billion.
