Moody's flips GPS outlook to negative

Moody's Investors Service said it changed GPS Hospitality Holding Co. LLC's outlook to negative from positive and affirmed all of GPS' ratings including its Caa1 corporate family rating, its Caa1-PD probability of default rating and the Caa1 rating on its senior secured notes due 2028.

“The outlook change to negative reflects GPS' weakened operating performance and unsustainably high financial leverage at its current earnings level. Macroeconomic pressures, including wage and commodity inflation, which, along with industry wide staffing shortages, have resulted in a decline in revenue, customer traffic and significantly lower profit margins.

“Credit metrics have significantly weakened with Moody's adjusted debt/EBITDA at over 10 times as of March 27, 2022 and EBIT/interest coverage of zero. Weakened earnings, capital investments and its sizable interest payment due Aug. 11 will also pressure free cash flow over the very near term,” the agency said in a press release.

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