Moody's cuts Sagittarius to distressed

Moody's Investors Service said it lowered Sagittarius Restaurants LLC's corporate family and probability-of-default ratings to Caa1 from B3 and the $60 million senior secured revolving credit facility and $295 million senior secured term loan credit facility to B2 (LGD2, 26.4%) from B1 (LGD2, 25.7%).

The outlook remains stable.

Moody's said the downgrade to Caa1 from B3 reflects Moody's expectation that Sagittarius' currently weak operating performance is likely to persist the next 12 to 18 months.

The company's operating performance has been well below expectation the past year, , the agency said, evidenced by its declining revenue, eroding profit margin and deteriorating cash flow generation in part due to persistently negative trend in guest counts and mounting cost pressures.

The Caa1 corporate family rating reflects Sagittarius' highly levered capital structure, weak free cash flow available for debt reduction after growth capital expenditures and highly competitive environment, Moody's said.

Ratings also consider relatively small scale and weak brand equity, the agency added.

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