Moody's upgrades OSI

Moody's Investors Service said it upgraded OSI Restaurant Partners, LLC's corporate family rating to Ba2 from B1, probability of default rating to Ba3-PD from B2-PD and senior secured bank ratings to Ba1 (LGD2) from Ba3 (LGD2). Moody's also affirmed OSI's SGL-1 speculative grade liquidity rating. The rating outlook is stable, and this concludes the review that began on June 16.

"The upgrade reflects OSI's materially stronger debt protection metrics driven in part by the steady improvement in operating performance, lower funded debt levels and lower interest costs in addition to the reduction in adjusted debt levels due to changes in Moody's approach for capitalizing operating leases,” Moody's senior credit officer Bill Fahy said in an agency news release.

As of the last-12-months period ended March 29, leverage declined to around 3.6 times from about 4.8 times for the same prior-year period, of which just over half of the improvement was driven by the change in the lease multiple, Moody’s said.

The agency said the Ba2 corporate family rating reflects OSI's improved credit metrics, high level of brand awareness, large and diversified asset base, positive operating trends and very good liquidity.

However, the ratings also incorporate OSI's below-average operating margins despite significant cost reductions to date, challenges in some international markets and with certain domestic concepts as well as soft consumer spending and competitive pressures that will continue to pressure earnings, Moody’s said.

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