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

KASIKORNBANK announces 2018 net profit of Baht 38,459 Million

Mr. Patchara Samalapa, President of KASIKORNBANK, said KASIKORNBANK announced net profit for the year of 2018 of Baht 38,459 Million, an increase of Baht 4,121 Million or 12.00% over the previous year. Operating performance for the year of 2018 compared...

Siam Commercial Bank reported 2018 net profit of Baht 40.1 billion

Siam Commercial Bank and its subsidiaries announced net profit of Baht 7.1 billion in the fourth quarter of 2018 and Baht 40.1 billion for 2018 (based on unaudited consolidated financial statements), a 7.1% yoy decrease from a year ago. Total operating...

Johnson Johnson Completes Acquisition of Ci:z Holdings Co., Ltd.

Johnson & Johnson (NYSE:JNJ) today announced the completion of the acquisition of Ci:z Holdings Co., Ltd. (TYO: 4924) (the "Company") for a total purchase price of approximately JPY / CNY230 billion. The acquisition was completed through a series of...

Siam Commercial Bank Partners with Chaixi Bameekiao and Visa To facilitate QR payment for noodle franchise

- Ms. Pimjai Tongmee, SCB's Payment Product Sales and Delivery Division Executive Vice President - Mr. Panrob Kamla, President of Chaixi Bameekiao Co. Ltd - Mr. Suripong Tantiyanon, Country Manager for Visa Thailand "Siam Commercial Bank" (SCB)...

Isotropic Systems Raises $14 Million in Series A Funding Led by Boeing HorizonX Ventures to Advance Space-Based Connectivity

- Isotropic's approach to next-generation integrated terminal creates profound change in terminal economics and performance to unlock the satellite industry's full potential Isotropic Systems Ltd., the next-generation integrated satellite terminal...

Related Topics