Moody's downgrades Sagittarius

Moody's Investors Service said it lowered Sagittarius Restaurants LLC's corporate family and probability-of-default ratings to B3 from B2 and its $60 million senior secured revolving credit facility and $295 million senior secured term loan credit facility to B1 (LGD2, 25.7%) from Ba3 (LGD2, 26.2%).

The outlook is stable

The agency said the downgrade was prompted by Sagittarius' weak financial metrics, which have been deteriorating as a result of the company's continued decline in operating earnings due in part to its inability to turn around negative revenues growth in an environment of fierce competition and cost inflation. Underpinning Sagittarius's weak credit metrics as of April are its high leverage and low free cash flow generation, both falling below the levels that would Moody's previously said would trigger a downgrade.

The ratings continue to incorporate the advantages of the diversified company resulting from the combination of Del Taco and Captain D's, both concepts' leading market positions in the United States, sizable scale and scope benefits stemming from a large unit base and the favorable segment/industry trends taking place, Moody's said.

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