Moody's rates Caribbean Restaurants

Moody's Investors Service said it assigned a rating of B2 to the proposed $210 million secured bank loan of Caribbean Restaurants LLC and raised the issuer rating to B3 from Caa1. The senior implied rating is affirmed at B2.

The outlook is stable.

Proceeds from the term portion of the new bank loan, a $75 million subordinated note, and a $96 million equity contribution will finance the leveraged buyout of the company by affiliates of Castle Harlan.

Moody's said limiting the ratings are the company's highly leveraged financial condition, the weak asset coverage for nominally secured debt, and the challenges in maintaining the positive performance differential between Burger King stores in Puerto Rico versus the mainland United States.

Supporting the ratings are Caribbean's leading average unit volume and restaurant margin within the Burger King system, the company's established position as the leading QSR restaurant operator in Puerto Rico, and the extended history of stability in operating strategy.

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