Moody's rates Vicorp notes B3

Moody's Investors Service said it rated at B3 the proposed $150 million senior unsecured note issue due 2011 of Vicorp Restaurants Inc. and assigned a speculative grade liquidity rating of SGL-2.

Vicorp operates the "Village Inn" and "Bakers Square" chains of family dining restaurants. Proceeds from a $15 million term loan and the new senior notes, besides paying a $25 million dividend to the equity sponsors, will refinance the company's existing bank loan and subordinated debt with debt that is lower cost and longer dated.

Moody's said the fundamental ratings consider the company's high financial leverage and weak coverage of cash fixed charges, the heavy competition in the family dining restaurant segment, and uncertainties related to the company's ambitious plans for store development.

However, supporting the ratings are the historical stability of revenue and restaurant margins and the company's position in several regions as an established family dining restaurant operator.

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