California Pizza Kitchen Responds Quickly to Bankruptcy Exit

According to Judd Tirnauer (the company’s new chief finance officer), things have improved for California Pizza Kitchen Inc. after a brief stint in bankruptcy court. Tirnauer, who replaced Carey Carrington as interim CFO at CPK last month, said that the company was forward-thinking and took the necessary restructuring steps in time for the pandemic.
“We are moving forward fast, and others are going backward because they face challenges that we have already overcome, as well as the (Covid-related) challenges that our industry faces. Redondo Beach’s fast-casual restaurant chain filed Chapter 11 protection before the U.S. Bankruptcy Court Southern District of Texas on July 29. It cited liquidity problems and the closing of indoor dining which was required by the state. This accounted for approximately 78% of the company’s net sales.

CPK’s creditors, led by Crescent Capital Group in Sawtelle, agreed that half of the company’s debt would be converted into equity. CPK’s long-term obligations will be reduced from approximately $403 million to $174 million. Crescent Capital Group of Sawtelle led the negotiations. The deal also included $46.8m new financing.

Tirnauer stated that once we have gotten through the Covid unknowns, we have a very reasonable capital structure to support the company’s size and the go-forward profitability that will allow us to expand. We can use that money to open new stores and for business development, instead of paying interest.

CPK employed around 10,000 people and had 181 locations in 29 states. It also had 36 restaurants at international airports. CPK has 155 restaurants and 7,500 employees.
Tirnauer stated, “We anticipate on bringing the rest back as soon as possible in more normalized operating conditions.” “
Management also renegotiated and canceled some leases, which resulted in $70 million of savings. He said that the move provided the company with “a lot more near-term flexibility” despite the uncertain operating environment.
CPK’s restaurants account for the bulk of its revenues, but CPK also offers takeout and delivery. CPK has a license agreement to distribute its pizzas at approximately 20,000 wholesale clubs, supermarkets, and other outlets. CPK could soon add more popular items to its retail menu including pasta and salads.

Tirnauer stated, “We’ve got very profitable products and market share in what we do best — pizza. We could leverage our other product types through these channels which, obviously is a revenue and profit generator as well as serving to increase brand awareness. Tirnauer stated that “we’ve got a very profitable product and market share in the best thing we do — pizza. We could leverage our other product categories through these channels, which is a revenue and profit generator as well as a way to increase brand awareness.
He stated, “It’s probably too early to give a timeline. It takes time and resources. How quickly the world gets back to normalcy is partly dependent on how fast it gets back to order. “

According to documents filed with the Securities and Exchange Commission, the company reported sales of $98.7 million between August and November.

CPK partnered with Morpho Travel Retail, a Costa Rica-based company, to open two new airport restaurants in Chile and Costa Rica.

Tirnauer said that international franchising can be a long-term investment but eventually it will become an annuity. Instead, you can open your restaurant and start to see the profits and sales immediately.

CPK was established by Larry Flax, Rick Rosenfield, and other lawyers from Beverly Hills. In 1992, PepsiCo Inc. bought a controlling stake. Five years later, it sold the company to Buckmann Rosser Sherill & Co. in New York. In 2011, Golden Gate Capital acquired CPK. Before the bankruptcy, they owned an 89% stake in the company.