Moody's downgrades HOA

Moody's Investors Service said it downgraded HOA Restaurant Group, LLC's corporate family rating to Caa1 from B3, probability of default rating to Caa1-PD from B3-PD and $180 million senior secured notes due 2017 to Caa1 (LGD4, 50%) from B3 (LGD3, 49%). The outlook is stable.

The agency said the downgrade was driven by HOA's weak operating performance and debt protection metrics that continue to remain well below Moody's previous expectations and its view that earnings growth, and consequently credit metric improvement, will remain challenging in 2013 as soft consumer spending, cost pressures and high level of promotions by competitors persist. For the 12 months ended Dec. 31, the ratio of debt to EBITDA was more than 7.5 times.

The ratings also reflect the company's narrow customer demographic versus peers, Moody's said.

The ratings are supported by HOA's reasonable scale in regards to number of restaurants, good brand awareness, the recent moderation in cost of some commodities such as chicken wings and adequate liquidity, the agency said.

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