Moody's raises Denny's

Moody's Investors Service said it upgraded the $120 million 12.75% senior notes due 2007 of Denny's Corp. to Caa1 from Caa2 and the $379 million 11.25% senior notes due 2008 to Caa3 from Ca.

The outlook is stable.

The rating upgrades were prompted by the company's improved operating performance and Moody's understanding that all net proceeds from the July 7 equity placement of $92 million will be used to retire debt.

However, limiting the ratings are the pressing requirement to refinance the bank loan, Moody's belief that free cash flow will continue to be constrained even with lower debt and higher sales, and the practical requirement for Denny's to substantially update its aged store base.

At the present time, Moody's does not rate the $118 million first-lien secured revolving credit facility or the $40 million subordinated-lien term loan (both loans due in December 2004).

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