Moody's ups Real Mex

Moody's Investors Service said it raised Real Mex Restaurants, Inc.'s probability of default rating and corporate family rating to Caa2 from Caa3, while affirming its $105 million senior secured notes at B2.

The outlook is negative.

Concurrently, its speculative-grade liquidity rating was affirmed at SGL-4, indicating expected weak liquidity in the next 12 months, the agency said.

Moody's said that while recognizing the modest improvement in near term liquidity with the extension of the revolver maturity and the elimination of the PIK term loan at Real Mex's parent holding company, it remains concerned that ongoing adverse trends and challenges in the casual dining industry could further contract EBITDA and erode cushion under covenants.

The probability of default rating and corporate family rating to Caa2 reflect Real Mex's modestly improved probability of default after it completed a substantial balance sheet restructuring on Nov. 13, the agency added.

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