S&P cuts Real Mex to junk

Standard & Poor's said it lowered its corporate credit rating on Real Mex Restaurants Inc. to CCC+ from B-.

The outlook is negative.

The agency said that the downgrade reflects the distinct possibility that the company will breach financial covenants of both its senior secured revolving credit facility and its senior unsecured credit facility given its poor operating trends and the fact that covenants of those loans become more restrictive in fiscal 2008.

The maximum leverage ratio of the company's revolver steps down to 3.55 from 3.85 and the minimum interest coverage ratio of its unsecured loan increases to 2.30 from 2.15, S&P noted.

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