Moody's cuts Real Mex to SGL-3

Moody's Investors Service said it downgraded the speculative grade liquidity rating of Real Mex Restaurants Inc. to SGL-3 from SGL-2 and affirmed all of the company's long-term ratings. The outlook is stable.

Moody's affirmed Real Mex's $105 million 10% senior secured notes due 2010 at B2, B2 senior implied rating and Caa1 issuer rating.

Moody's said the fundamental ratings consider the company's high financial leverage and weak coverage of cash fixed charges, dependence on economic conditions within a limited geographic area and the substantial challenges expected from the acquisition.

According to Moody's, the lower SGL rating primarily reflects the reduction in liquidity availability given utilization of almost all revolving credit facility capacity for letters of credit.

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