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NPC International Inc., the largest franchisee of Pizza Hut restaurants in the U.S., filed for bankruptcy after coronavirus-related shutdowns added to competitive pressures in the restaurant industry.
The closely held company sought Chapter 11 protection in the Southern District of Texas court on Wednesday. NPC opened its first Pizza Hut restaurant in 1962 and operates more than 1,225 Pizza Hut and over 385 Wendy’s stores across the U.S., according to its website.
NPC and Pizza Hut have struggled with rising labor and food costs while trying to expand delivery and move away from traditional dine-in restaurants. The Overland Park, Kansas-based company also faces cut-throat competition from rivals such as Domino’s Pizza Inc. And Papa John’s International Inc.
The company has $903 million in debt and has pre-negotiated a restructuring agreement with about 90% of its first lien lenders and 17% of second lien lenders. The plan is aimed at reducing the company’s debt, with first lien lenders taking equity and potentially participating in a new cash injection. It also includes the sale of at least part of the company’s restaurants, according to the filing.
The Chapter 11 filing doesn’t mean Pizza Hut and Wendy’s are going out of business. NPC can keep operating while it works out a plan to pay its bills and turn the business around, and the bankruptcy doesn’t affect the thousands of other Pizza Hut and Wendy’s outlets owned by other franchisees.
Ahead of the pandemic, NPC, backed by private investment firm Eldridge Industries LLC, brought in the help of restructuring advisers at law firm Weil Gotshal & Manges as well as investment bank Greenhill & Co. And operational adviser AlixPartners LLP, Bloomberg reported. Eldridge wrote off its equity investment in NPC last year.
Restaurants are facing new pressures with the temporary closures of locations across the country to stem the spread of coronavirus. The drain on revenue has been too much for some, causing them to file for bankruptcy protection. Recent filings include CEC Entertainment Inc., the parent of Chuck E. Cheese and Peter Piper Pizza, and the U.S arm of Le Pain Quotidien. Greenwich, Connecticut-based Eldridge bought Le Pain Quotidien out of bankruptcy.
–With assistance from Davide Scigliuzzo and Luca Casiraghi.
