Moody's lowers OSI loans to B1

Moody's Investors Service said it downgraded OSI Restaurant Partners, Inc.'s $150 million working capital revolving credit facility due 2013, $100 million pre-funded revolver due 2013 and $1.31 billion term loan B due 2014 to B1 (LGD3, 33%) from Ba3 (LGD3, 28%).

The agency also affirmed OSI's corporate family and probability-of-default ratings at B2, $550 million senior unsecured notes due 2015 at Caa1 (LGD5, 85%) and speculative grade liquidity rating at SGL-2.

The outlook is stable.

Proceeds, together with a commercial mortgage-backed transaction and contributed equity, will fund the acquisition of OSI by private equity sponsors Bain Capital Partners and Catterton Partners and other sponsors that include OSI's founders and members of the current management team.

The agency said the lowering of the senior secured bank loans was prompted by the change in OSI's liability structure as a result of an increase in total secured debt of about $230 million, due to the re-allocation of $150 million of unsecured debt to secured debt, in addition to $80 million of additional secured debt required to fund the transaction.

The B2 corporate family rating reflects OSI's high financial leverage, modest coverage and marginal free cash flow generation, as well as the highly competitive environment within the casual dining segment of the restaurant industry which Moody's said will likely persist over the intermediate term.

However, the ratings also incorporate OSI's significant scale and scope, the benefits of a diversified revenue stream stemming from the various concepts and good liquidity, the agency said.

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