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Moody’s rates Cheddar’s loans B1, Caa2
Moody's Investors Service said it assigned a B1 rating to Cheddar's Casual Cafe, Inc.'s $265 million first-lien bank facility and a Caa2 to its $105 million second-lien term loan, part of its revised capital structure.
At the same time, the agency affirmed the B3 corporate family rating and B3-PD probability of default rating.
The B3 assigned to the previously announced senior secured bank facility was withdrawn as the instruments were never issued.
The outlook remains stable.
Cheddar's now plans to raise a $265 million first-lien bank facility – made up of a $35 million five-year senior secured revolver and $230 million five-year senior secured term loan A – and a $105 million senior secured second-lien six-year term loan.
Proceeds from the term loans will be used to acquire 44 Cheddar's restaurants from its largest franchisee, refinance $116 million of existing debt and pay fees and expenses.
The changes to the new facility include, among other things: higher total interest due to the introduction of second-lien debt; and the establishment of first-lien leverage, total net leverage and interest coverage financial maintenance covenants – the previous deal was covenant lite with only a springing leverage covenant on the revolver.
"Cheddar's revised plan does not increase total leverage and modestly decreases interest coverage," Moody’s assistant vice president, analyst Peter Trombetta said in a news release.
"The transaction will bring 44 franchised restaurants back under management's control which will help the company maintain quality and consistency across those restaurants – an important aspect for restaurants in the casual dining segment."
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