Moody's rates GPS Hospitality loans B3

Moody's Investors Service said it assigned a B3 corporate family rating and B3-PD probability of default rating to GPS Hospitality Holding Co. LLC.

Moody's also assigned B3 ratings to GPS's proposed $40 million revolving credit facility and $265 million first-lien term loan.

The outlook is stable.

The proceeds from the proposed $265 million first-lien term loan, along with $10 million of new preferred equity to be issued, will be used to refinance the company's existing debt, fund the acquisition of two Pizza Hut franchisee groups for nearly $27 million, pay about $7 million in related fees and expenses and put about $3 million of cash to the balance sheet, Moody's said.

The ratings consider the company's high pro forma leverage of 6.7x as a result of the proposed refinancing and acquisition transaction, sizable capital expenditure requirements and the acquisitive nature of the company, the agency said.

The ratings also reflect the relative strength of the Burger King brand and GPS's position as a top three franchisee in the system, Moody's said, as well as the expectation that credit metrics will improve from current levels due to EBITDA growth.

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