Fitch: Brinker outlook negative

Fitch Ratings said it affirmed its BBB+ rating for Brinker International's senior unsecured notes, including its $275 million bank credit facility. The outlook was revised to negative.

Brinker's senior unsecured debt includes $431.7 million face value of zero coupon senior convertible notes, which had an accreted value of about $269 million as of June 30, and $300 million of 5.75% notes due 2014.

Fitch said the negative outlook reflects a recent decline in Brinker's operating results and higher leverage due to a recent debt issuance and uncertainty about Brinker's willingness to redeem its convertible notes beginning in October 2004 as originally anticipated.

In May, Brinker issued $300 million of 5.75% unsecured notes to prefund its anticipated redemption of convertible notes beginning in October 2004. Because Brinker's stock price has declined below the conversion price, it is less likely that Brinker will redeem the convertible notes in October 2004.

Brinker has the right to redeem the convertible notes anytime on or after Oct. 10, 2004. If Brinker does not proceed with the redemption, the convertible noteholders have the right to put the notes back to Brinker in October 2005, in which case, Brinker would have the option to settle in any combination of cash or shares.

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