Moody's affirms Real Mex SGL-3

Moody's Investors Service said it affirmed Real Mex Restaurant Inc.'s speculative grade liquidity rating at SGL-3. The company's Caa2 corporate family rating and stable outlook are unaffected by the announcement.

The company has a $130 million second-lien senior secured notes due 2013 rated B3 (LGD2, 24%).

Real Mex's SGL-3 incorporates the view that the company's overall liquidity profile for the next 12 months will likely be adequate, according to the agency.

The agency said it expects Real Mex's free cash flow to be slightly positive despite the low EBITDA level and the $15 million revolving credit facility due July 2012 remained undrawn as of June 27.

Real Mex's Caa2 corporate family rating continues to reflect the challenges Real Mex will face to reverse its revenue decline primarily driven by the ongoing, albeit somewhat decelerated, negative same store sales trend, in a very difficult operating environment for casual dining concepts, the agency said.

The rating also incorporates the company's high financial leverage, poor interest coverage and weak free cash flow generation, the agency noted.

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