Fitch cuts Arcos Dorados

Fitch Ratings said it downgraded the ratings of Arcos Dorados BV (AD) and Arcos Dorados Holdings Inc., as well as the R$675 million and $475 million senior unsecured notes issued by Arcos, to BB+.

The outlook is negative.

Fitch said the downgrade of Arcos' and AD's ratings reflects the company's weak operating performance, which has felt the impact of a very challenging macroeconomic environment in Latin America, specifically in Venezuela, Brazil, and Mexico. Soft consumption across the region and currency devaluations have contributed to an increase in the company's net lease-adjusted leverage above 4.5 times, which is above the 3.5 times ratio expected by Fitch.

The negative outlook reflects concern that the company may not be able to reduce its net lease-adjusted debt-to-EBITDAR ratio to below 4 times within the next 12 to 24 months, the agency said.

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