Moody's ups Sbarro ratings, outlook

Moody's Investors Service said it upgraded both the corporate family and senior unsecured ratings of Sbarro, Inc. to Caa1 from Caa2 while at the same time changed the outlook to positive from negative.

Ratings upgraded with a positive outlook include the $255 million senior unsecured notes maturing in 2011 to Caa1 from Caa2.

Moody's said the rating actions reflect Sbarro's improved operating performance in fiscal 2005 and year to date highlighted by positive same-store sales growth and a steadily expanding franchisee base.

However, the ratings remain constrained by weak credit metrics stemming primarily from high financial leverage, limited financial flexibility and access to alternate liquidity, intense competition within the pizza segment of the restaurant industry and seasonality of revenues and cash flow driven largely by shopping-mall traffic, the agency said.

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