Pizza Options

All,

Following Hony’s announcement of having received tenders for some £93m face value of PE 2Lns yesterday, its probably worth exploring in particular three options that Hony may consider from here:

Assumptions:

- Hony seem to have access to further funds. Clearly the amount is unknown, but it is unlikely that they’d have spent £35m on a market transaction if they’d have nothing left to support the business with in the actual negotiation.

- Hony understand that Layering the SSNs aggressively likely loses them the company in 2021. At least HL do.

- A blocking minority in the 2Lns prevents a vanilla SoA.

- Hony will be looking to raise the net cash-flow at PE and potentially increase / raise a new S.Sr. RCF.

Options:

1) Aggressive/Now/Expensive:

Hony could approach the SSNs with a plant to take PE through administration. Their newly acquired instructing majority in the 2nds could give them the negative control along the way, but the price of 40p/£ they have now paid for the controlling stake will allow the 2Lns to be heard in court and could lead to a counter bid by the 2Lns - if at an information disadvantage. It would trigger CDS and Hony or the 2Lns would have to bring fresh cash.

2) Elegant/Extend/Cheap:

Hony could turn around to the 2nd Liens with the offer to exchange those who agree into "1.5 Lien Notes”. The company could issue new notes that participate in the Sr. Secured Collateral p.p. with the SSNs, but would be de-facto subordinated to the SSNs by an intercreditor agreement. To make it more interesting and not just coercive, perhaps those consenting could also participate in the new S.Sr. RCF along with consenting SSNs and Hony may even be able to save their second cash stash for 2021 - or put it in in return for an extension, although that may run into opposition at the highly levered SSNs. This would not trigger CDS, but would leave £100m more debt on the company.

3) Nothing:

Hony vote to PIK their 2Lns and NCF at PE rises by some £8m. Stage 2 might come much later, perhaps when PE can show some positive momentum.

Do let us know your thoughts,

Wolfgang