S&P cuts California Pizza facility

S&P said it revised the outlook on California Pizza Kitchen Inc. to negative from stable and affirmed its B- corporate credit rating.

At the same time, the agency lowered the issue-level rating on the company's secured first-lien credit facility consisting of a $30 million revolver and $290 million term loan to B- from B and revised the recovery rating to 3 from 2. The 3 recovery rating indicates an expectation for meaningful (50% - 75%; rounded estimate: 65%) recovery in the event of default.

S&P also affirmed the CCC issue-level rating on the company's second-lien term loan facilities. The recovery rating is 6, indicating an expectation for negligible (0% - 10%; rounded estimate: 0%) recovery in the event of default.

S&P said the negative outlook reflects its expectation that CPK will continue to experience sales and profit declines this year, as lower customer traffic and ongoing cost pressure offset the benefits of the recent closure of underperforming restaurants and potential increases in average check.

Following a 100 basis point (bps) margin decline in fiscal 2017, the agency expects further pressure on EBITDA margins in 2018 because of ongoing higher food and labor costs.

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