Moody's drops Ruby Tuesday, notes

Moody's Investors Service said it downgraded Ruby Tuesday Inc.'s corporate family rating to B3 from B2 and probability of default rating to B3-PD from B2-PD.

In addition, the agency lowered the rating on Ruby Tuesdays $250 million 7 5/8% senior unsecured notes due 2020 to Caa1 (LGD4, 64%) from B3 (LGD5, 74%) and the speculative grade liquidity rating to SGL-3 from SGL-2.

The outlook was changed to negative from stable.

Moody's said the downgrade was driven by operating performance that has been substantially weaker than its prior expectations and deteriorating debt protection metrics. For the 12-month period ending Sept. 3, credit metrics were weak with debt to EBITDA of about 5.5 times and EBITA to interest expense of under 1 time. Given the expectation for continued soft consumer spending and high level of promotions and discounts by competitors, Moody's believes that debt to EBITDA could weaken to over 6.5 times over the next 12 to 18 months.

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