Moody's rates Jack in the Box loans Ba3

Moody's Investors Service said it downgraded Jack in the Box Inc.'s corporate family rating to Ba3 from Ba2 and probability-of-default rating to B1 from Ba3 and assigned provisional Ba3 ratings with loss-given-default assessments of LGD3 (37%) to the company's proposed $475 million guaranteed senior secured term loan B due 2012 and $150 million guaranteed senior secured revolving credit facility due 2011.

The $275 million guaranteed senior secured term loan B due 2011 and $200 million guaranteed senior secured revolving credit facility due 2008 were affirmed at Ba1 (LGD2, 17%).

This concludes the review for possible downgrade begun on Nov. 21, and the outlook is stable.

Proceeds from the proposed new bank facility, along with $150 million of cash on hand, will be used to finance the company's Dutch tender offering and refinance its existing bank facility.

The agency said the downgrade reflects Jack in the Box's weak credit metrics to date, management's adoption of a more aggressive financial profile that will likely result in significantly higher balance sheet debt levels over the near term, significant competitive pressures and the company's geographic concentration. Affirmation of the Ba1 senior secured debt ratings reflects the benefit provided by a secured interest in all personal property of the company and the current level of debt in regards to overall liabilities.

The ratings are supported by the company's reasonable scale, brand awareness and the success of new product offerings, as well as the positive performance and product diversity potential of its Qdoba brand. Moody's also views the company's liquidity as good with $230 million of cash on its balance sheet as of Oct. 1 and no current borrowings under its $200 million revolving credit facility.

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