U.S. Bankruptcy Judge Marvin Isgur is about to cut California Pizza Kitchen’s $400 million in debt into smaller slices with the help of some Texas lawyers.
The Los Angeles-based pizza chain announced Thursday that it has filed for Chapter 11 restructuring in Judge Isgur’s court in the Houston division of the Southern District of Texas.
The bankruptcy is just the latest of multiple occasions in which Kirkland & Ellis and Jackson Walker have teamed up. Kirkland is serving as CPK’s lead restructuring counsel, while Jackson Walker’s Matt Cavenaugh is serving as local counsel.
According to the voluntary petition that Cavenaugh filed on CPK’s behalf, the pizza chain has between 10,000 and 25,000 creditors. Its liabilities range between $500,000 and $1 billion, exceeding the $100 million to $500 million range that the company lists its assets under.
While Simon Property Group of Indianapolis is listed as CPK’s largest unsecured creditor (owed $2.87 million), its second largest creditor, Sysco Corp., hails from Houston. Sysco says it’s owed $2.85 million. A significant amount of CPK’s top 30 unsecured creditors are landlords across the nation.
In court filings, CPK CEO James Hyatt cited the COVID-19 pandemic and said the restructuring agreement the chain entered with its lenders establishes that the company will emerge from bankruptcy within 85 days.
“CPK must move swiftly through these Chapter 11 cases,” CPK CEO James Hyatt said in a court filing. “CPK will use this time to generate as much consensus as possible with the rest of its capital structure, negotiate with lessors to rationalize its lease footprint, and prepare for emergence as a healthier company positioned for long-term success.”
The agreement includes $46.8 million in new money debtor-in-posession financing, which will allow CPK to continue its daily operations.
CPK said the pre-negotiated bankruptcy filing will allow for the 35-year-old pizza restaurant chain to “close unprofitable locations, reduce long-term debt load and quickly emerge from bankruptcy as a much stronger company.”
Guggenheim Securities is serving as CPK’s financial advisor and investment banker, while Alvarez & Marsal is serving as the restructuring advisor.
Lawyers from Gibson Dunn’s New York office are representing the ad hoc priority and first lien lender group. Porter Hedges has appeared on the docket as the ad hoc group’s local counsel, a team that includes John Higgins IV, Shane Johnson and Megan Young-John. FTI Consulting is serving as the ad hoc group’s financial advisor.