Moody's rates Arby's loan B1

Moody's Investors Service said it assigned a rating of B1 to the proposed $700 million bank loan jointly arranged by Arby's Restaurant Holdings, LLC and Arby's Restaurant Group, Inc.

Moody's said it rated the company's $100 million revolving credit facility, $600 million term loan and corporate family rating B1.

With cash on hand and incremental investment from the parent Triarc Companies, Inc., proceeds from the new bank loan will fund the purchase of the largest Arby's franchisee RTM Restaurant Group and refinance most existing debts, Moody's said.

Limiting the ratings are the substantial fixed charge burden for debt service and dividend payments as well as the high level of competition among many sandwich restaurant concepts, the agency noted.

However, Moody's expectation that the borrowers will generate meaningful amounts of discretionary cash flow and the growth potential of Arby's support the assigned ratings, the agency said.

The outlook is stable.

The ratings are further limited by the company's leveraged financial condition and modest fixed charge coverage, the correlation of Arby's sales to overall trends in quick service restaurants and the vulnerability to factors affecting beef supply and demand, Moody's said.

However, the ratings consider the expected stability of the business model that is weighted toward high-margin franchisee royalties, the agency added.

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