S&P assigns Carrols Restaurant notes CCC

S&P said it assigned CCC issue-level and 6 recovery ratings to Carrols Restaurant Group Inc.'s planned $300 million of senior unsecured notes due 2029. The 6 recovery rating indicates an expectation for negligible (0%-10%; rounded estimate: 5%) recovery in default.

The agency also raised the issue-level rating on the company's term loan due 2026 to B+ from B- and revised the recovery rating to 1 from 3. The 1 recovery rating indicates an expectation for very high (90%-100%; rounded estimate: 95%) recovery in bankruptcy.

“We revised our recovery rating because the reduced size of Carrols' senior secured obligations improves the recovery prospects for its term loan,” S&P said in a press release.

The company will use the proceeds and about $45 million of revolver borrowings, to repay its higher interest incremental term loan, added in 2020, a portion of the original term loan, as well as to fund its recent acquisitions of 19 restaurants. Pro forma for the proposed refinancing, Carrols will have about $175 million outstanding on its term loan, which is about a third of its current term loan balance.

“In our view, the leverage-neutral transaction will not have a material effect on the company's overall credit profile. Our B- issuer credit rating and positive outlook continue to incorporate our expectation for good operating performance through 2021 with S&P Global Ratings-adjusted leverage sustained in the mid-6x area,” S&P said.

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