Moody’s cuts P.F. Chang’s, loans, notes

Moody's Investors Service said it downgraded P.F. Chang’s China Bistro Inc.'s corporate family rating to Caa1 from B3, probability of default rating to Caa1-PD from B3-PD, $325 million term loan and $60 million revolver to B1 from Ba3 and $300 million senior unsecured notes to Caa2 from Caa1.

The outlook is negative.

"The downgrade and negative outlook reflect PF Chang's weaker than expected operating earnings leading to interest expense and capital expenditures outstripping internal cash flow generation," Moody's senior credit officer Bill Fahy said in a news release.

The level of negative free cash flow accelerated in 2017 resulting in a larger decline in cash balances, leaving the company more reliant on its revolving credit facility to fund cash needs in 2018.

"Given our view that revenue growth will remain difficult and margin pressures will continue, PF Chang's ability to refinance its $300 million notes well in advance of June 30, 2020 will be challenging," Fahy added in the release.

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