S&P upgrades Flynn Restaurant

S&P said it raised Flynn Restaurant Group LP’s issuer rating to B, the rating on its first-lien senior secured debt to B and its second-lien senior secured debt rating to CCC+. The 3 and 6 recovery ratings on the first- and second-lien debt, respectively, are unchanged. S&P also revised the outlook to stable from negative.

Flynn plans to acquire 937 Pizza Hut Restaurants and 194 Wendy's from NPC International Inc.

“Flynn is funding the nearly $580 million acquisition through a $117 million term loan at Wend American Group, a $170 million term loan at Hut American Group, and new equity totaling over $300 million (including $156 million of preferred equity, which we treat as debt in our adjusted leverage calculation). Pro forma for the transaction, we expect operating margins to improve after integration expenses roll off in 2021 due to the higher margins at both Wendy's and Pizza Hut relative to the existing consolidated group,” S&P said in a press release.

The agency noted Flynn’s operating performance year to date at its quick-service restaurant business has been better than expected.

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