Moody's lowers Arby

Moody's Investors Service said it lowered Arby's Restaurant Group, Inc.'s corporate family rating to B2 from B1, probability-of-default rating to B3 from B2 and senior secured ratings to B1 (LGD3, 30%) from Ba3 (LGD2, 28%).

The outlook is negative.

According to Moody's, the downgrade reflects weaker-than-expected operating performance due to a persistently weak consumer environment and high cost inflation.

The B2 corporate family rating reflects Arby's high leverage and weak debt protection metrics, as well as view that the cushion under its financial covenants is modest and may require the company to seek amendments from its lenders, the agency said.

Ratings are supported by Arby's reasonable level of brand awareness in its core markets, meaningful scale and good distribution between its lunch and dinner day parts, the agency noted.

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