S&P rates HoA, notes B

Standard & Poor's said it assigned its B corporate credit rating to HoA Restaurant Group LLC (Hooters), along with a B rating to the company's $180 million senior secured second-lien notes.

The notes are rated the same as the corporate credit rating with a 4 recovery rating, indicating 30% to 50% recovery in a default.

The outlook is stable.

The proceeds will be used to repay its existing term loan, redeem mezzanine debt and pay fees associated with the transactions, S&P said.

Earlier this year, the proceeds of its existing term loan and mezzanine debt were used to facilitate the purchase by private-equity of Hooters of America Inc. and Texas Wing Inc.

Both entities were converted to limited liability corporations and are now guarantor subsidiaries of Hooters. The notes are Rule 144A for life.

The ratings reflect an expectation that Hooters will expand operating margins and profits as a result of cost-saving opportunities in purchasing and distribution and combining administrative functions of both companies, the agency said.

This will lead to credit metric enhancement, but S&P said it foresees the company maintaining a highly leveraged financial risk profile in the near term.

Because of sustained high unemployment, rising energy prices and intense competition within the industry, the agency said it does not foresee meaningful improvement over the next year.

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