S&P rates Fogo De Chao loans B

S&P said it assigned a B corporate credit rating to Fogo De Chao Inc.

The outlook is stable.

The agency also assigned a B rating and 3 recovery rating to Fogo's proposed senior secured debt, consisting of a $40 million cash flow revolver facility due in 2023 and $300 million term loan due in 2025.

The 3 recovery rating indicates 50% to 70% expected default recovery.

The ratings reflect the company's position as a small player in the intensely competitive fine-dining segment of the restaurant industry, single-brand focus with limited ability to pass through price increases and exposure to fluctuations in commodity prices and currency headwinds in Brazil, S&P explained.

The agency said it believes there are some execution risks associated with the company's recent and planned strategic initiatives to improve operating performance under its new ownership structure.

These factors are somewhat offset by the company's participation in the highly differentiated Brazilian churrasco dining experience and the company's more favorable labor economics, S&P said.

Fogo sources efficient labor internationally through its visa programs, which could help weathering rising labor wages, the agency said.

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