Moody's lowers New Sbarro

Moody's Investors Service said it downgraded New Sbarro Intermediate Holdings, Inc.'s debt ratings, including the probability of default rating to Caa3-PD from Caa1-PD and corporate family rating to Ca from Caa1.

At the same time, the agency lowered the company's secured first-out term loans to Caa2 (LGD3, 30%) from B1 (LGD 2, 12%) and second-out term loan to Ca (LGD5, 74%) from Caa1 (LGD 4, 50%).

The outlook was changed to negative from stable.

Moody's said the downgrade of Sbarro's probability of default rating to Caa3-PD reflects the increased probability of default stemming from persistently weak operating performance, weak credit metrics and a deterioration in liquidity.

At these performance levels, Sbarro's capital structure is unsustainable and the potential for a payment default over the near term is high, the agency said.

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