Red Lobster Intermediate Holdings LLC Outlook Revised To Negative From #B-# Rating Affirmed

Stocks and Financial Services Press Releases Thursday October 19, 2017 09:08
NEW YORK--19 Oct--S&P Global Ratings

NEW YORK (S&P Global Ratings) Oct. 18, 2017--S&P Global Ratings today revised its outlook on Orlando, Fla.-based seafood casual dining restaurant operator Red Lobster Intermediate Holdings LLC to negative from stable. We also affirmed the 'B-' corporate credit rating on the company.

The outlook revision reflects the recent soft fiscal first-quarter 2018 performance, which has resulted in weak credit metrics and our expectation for a larger-than-anticipated cash flow deficit. As a result, we forecast weaker credit metrics than we previously expected for the year. Though liquidity remains adequate, we expect leverage will remain elevated, partly due to our inclusion of the investment by Thai Union Group PCL as preferred stock and our expectation of no additional debt reduction beyond scheduled amortization. In late 2016, Thai Union acquired a 25% common equity stake in Red Lobster and has the option to increase its ownership by an additional 24% if it converts its preferred shares into common equity.

The negative outlook reflects Red Lobster's weak credit metrics, the likelihood that we could lower the rating over the next year if the company's cash flow position significantly deteriorates, and our expectation that operating performance and traffic continues to contribute to same-store sales in the negative 3% area.

We could lower the rating into the 'CCC' category if we conclude liquidity is deteriorating more than we anticipate, cash generation looks to be negative, and the capital structure becomes unsustainable. This could result from

prolonged negative same-store sales cadence driving strained cash flows that leads to substantial borrowings on the revolver. In this scenario, increasing labor cost, heightened competitive pressures, and volatile commodity costs more than offset expected cost savings. This could also occur if restaurant improvements fail to drive traffic and improve profits.

An outlook revision to stable over the next 12 months is less likely given our view that operating performance will remain under pressure. Still, we could eventually revise the outlook to stable if credit metrics substantially recover from improved market conditions and we think the company can achieve sustained revenue improvement, profit growth, and cash flow improvement.


Latest Press Release

Fitch Affirms Makro#s Rating at #A(tha)#; Outlook Stable

Fitch Ratings (Thailand) Limited has affirmed Siam Makro Public Company Limited's National Long-Term Rating at 'A(tha)'. The Outlook is Stable. KEY RATING DRIVERS Overseas Expansion Drives Rising Leverage: Makro's funds from operations (FFO) adjusted...

Fitch Affirms CP ALL#s Ratings at #A(tha)#; OutlookStable

Fitch Ratings (Thailand) Limited has affirmed retailer CP ALL Public Company Limited's National Long-Term Rating at 'A(tha)' with a Stable Outlook. Fitch has also affirmed the National Long-Term Rating of its secured bonds at 'A(tha)', the National...

KTC achieves major milestone with a net profit of 3.911 billion Baht in Q3,with preparations in motion to diversity into Nano and Pico Finances.

KTC declares a net profit for the end of Q3 of 3.911 billion Baht. Profits have grown 65 percent due to a surge in credit card spendings, receivables from credit cards and personal loans, along with the upholding of approval standards within appropriate...

Photo Release: KBank and AIS support hospitals to make transition toward the Healthcare 4.0 era

Recently, at KBank Phahon Yothin Building, Mr. Wirawat Panthawangkul (right), KBank Senior Executive Vice President, and Mr. Yongsit Rojsrikul, Chief Enterprise Business Officer, Advanced Wireless Network Company Limited of AIS Group, signed a memorandum...

AEON partners with JCB to launch AEON J-Premier Platinum Credit Card to offer exclusive privileges throughout Thailand and Japan

AEON Thana Sinsap (Thailand) Public Company Limited partners with JCB International (Thailand) Co., Ltd. to launch "AEON J-Premier Platinum Credit Card" that will allow Thais to enjoy everything Japan, with exclusive privileges and offers in dining,...

Related Topics