Last week Pizza Express announced that it completed a recapitalisation scheme to reduce its debt by more than £400m and to inject £40m of cash into the company. With the casual dining market being hit heavily over the last nine months, and having already cut a number of jobs earlier this year, this is hopefully a positive step for the well-known chain. It also signals a trend that we are expecting to see increase in the coming months, both in the hospitality industry and other sectors which have been impacted heavily by the pandemic, where balance sheets are heavily weighed down with debt.

Earlier this year, The CityUK estimated that by the end of March 2021 c.£100 billion could arise in unsustainable debt, of which £32-36 billion has been provided through Government lending schemes. Although some of the Government schemes have been extended into 2021 giving companies some much needed breathing space, this will also increase the level of debt. Therefore companies are turning their attention to how they can reduce their unprecedented, and often unsustainable, level of debt now and be ready to emerge with a healthier balance sheet.

One option is to carry out a recapitalisation where, in its simplest form, debt is swapped for equity in the company. As with all restructuring routes, there will be a number of issues to consider and over the next couple of months we will be publishing a series of articles considering:

• How can a company effect a recapitalisation to reduce its debt;
• What challenges may a company face in carrying out a recapitalisation, depending on its size and level of debt; and
• Different perspectives on recapitalisations, including from the point of view of lenders, borrowers and investors.