Moody's downgrades Wendy's

Moody's Investors Service said it downgraded the corporate family and probability-of-default ratings of Wendy's International Holdings, LLC to B2 from B1 and assigned a B2 rating (LGD3, 46%) to its proposed $550 million guaranteed senior unsecured notes due 2016.

The agency lowered the senior unsecured note ratings of Wendy's International Inc. to Caa1 (LGD5, 86%) from B2 (LGD5, 74%) and confirmed the senior secured ratings of Arby's Restaurant Group at Ba2 (LGD1, 9% from LGD2, 22%).

The outlook is stable. This concludes the review that began on June 2.

"The rating actions reflect the material increase in debt as a result of the proposed new note offering, which will result in debt protection metrics that are considerably weaker than previously expected and more representative of the revised ratings," Bill Fahy, a Moody's vice president, said in a statement.

The B2 corporate family rating reflects the company's high leverage and weak coverage, adequate liquidity and meaningful scale, the agency said.

Ratings also reflect Wendy's reasonable level of brand strength versus its peers but also considers its more modest scale, limited day-part and less robust offering of new products, Moody's said.

Ratings also consider the persistently weak traffic patterns at Arby's as well as its smaller scale versus Wendy's and other quick service restaurants, the agency noted.

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