NPC International, the largest U.S. franchisee of Yum Brands’ Pizza Hut and Wendy’s, applied for Chapter 11 insolvency on Wednesday.
The business operates more than 1,200 Pizza Huts and almost 400 Wendy’s restaurants.
In contrast to most of the restaurant industry, Pizza Hut is one of the rare companies to report same-store sales increases in April and May, thanks to higher digital and delivery sales. However the pandemic follows years of slumping U.S. sales for Pizza Hut, and NPC has actually battled with a debt concern of roughly $1 billion.
Seeking Chapter 11 protection indicates that NPC can continue to operate while it tries to turn service around. Pizza Hut said in a statement that NPC’s areas of the pizza chain continue to serve food. The franchisee pre-negotiated a restructuring contract with the majority of its loan providers.
“While NPC’s Chapter 11 filing was expected, we view it as an opportunity to create a better future for NPC’s Pizza Hut restaurants,” a Pizza Hut spokesperson said in a statement. “As NPC works through this process, we support an outcome resulting in an organization with a lower, more sustainable level of debt, ownership focus on operational excellence and a greater level of restaurant investment.”
In 2019, NPC saw its financial obligation slide further and even more into junk area after credit downgrades from S&P Global Rankings and Moody’s. Both rankings agencies devalued the franchisee’s debt in February after it did not make interest payments due to lending institutions on Jan. 31.
In a note released Tuesday before the insolvency filing, Cowen analyst Andrew Charles approximated that Yum might lose approximately $54.2 countless annualized royalty profits and 13 cents of annualized revenues per share if NPC stops paying royalty fees. Pizza Hut and Wendy’s are NPC’s largest financial institutions, according to its personal bankruptcy filing.
NPC opened its first Pizza Hut area in 1962 and went public in 1984. The franchisee went personal again in 2001 and was owned by a series of personal equity firms prior to being offered in 2018 to 2 family offices, Delaware Holdings and Eldridge Investment Holdings.
NPC signs up with a host of other business that have actually declared bankruptcy throughout the pandemic, consisting of Chuck E. Cheese’s moms and dad business CEC Entertainment, rental vehicle company Hertz, and retailers J. Team and J.C. Penney.