Moody’s trims Darden

Moody’s Investors Service said it downgraded all ratings of Darden Restaurants, Inc., including its senior unsecured ratings to Baa3 from Baa2. The outlook is negative.

"The downgrade is in response to the expectation for a material deterioration in earnings and credit metrics that are driven by the closure of in-store dining across Darden’s entire restaurant base due to efforts to contain the spread of the coronavirus including recommendations from federal, state and local governments," said Bill Fahy, a Moody’s senior credit officer, in a press release.

In response to these operating challenges and to strengthen liquidity, Darden drew down the entire amount available under its $750 million bank revolver in addition to suspending its dividend, share repurchases and all discretionary capital expenditures. "While many restaurants are still able to continue to provide take-out, curbside pick-up and delivery, total restaurant sales will still be substantially below normal operating levels for the typical casual dining restaurant," stated Fahy.

The negative outlook reflects the uncertainty with regards to the potential length and severity of closures and the ultimate effect these closures will have on Darden’s revenues, earnings and ultimate liquidity.

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