Moody’s trims Checkers

Moody’s Investors Service said it downgraded Checkers Holdings, Inc.’s corporate family rating to Caa2 from Caa1 and probability of default rating to Caa2-PD from Caa1-PD.

Moody’s added LD or limited default to Checkers’ probability of default rating. The designation will be removed from the company’s PDR after three days, the agency said.

Last month, Checkers obtained an amendment from its second-lien lenders who agreed to convert the cash interest they were due to a payment-in-kind obligation, about $11 million a year until June 30, 2021. After that, the obligation converts back to cash. Moody’s considers this a distressed exchange, which falls under Moody’s definition of default.

Moody’s also lowered Checkers senior secured first-lien term loan and first-lien revolver to Caa1 from B3.

“The Caa2 corporate family rating and negative rating outlook consider that Moody’s believes Checkers’ capital structure is unsustainable in its current form and that the company will ultimately seek a debt refinancing that would include some impairment to the lenders.” said Billy Fahy, a vice president at Moody’s, in a news release.

The outlook is negative.

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