NEW YORK Standard & Poor’s Rating Services assigned Outback Steakhouse parent OSI Restaurant Partners Inc. non-investment-grade credit ratings, with a negative outlook, because of its “highly leveraged” capital structure as the restaurant operator prepares for its $3.2 billion buyout. That rating is sometimes known as junk-grade.
OSI’s ratings, which included separate outlooks for its corporate credit, its planned $1.3 billion bank facility and its planned $700 million unsecured notes, were all “regarded as having significant speculative characteristics,” according to S&P’s credit rating criteria.
S&P assigned Tampa-based OSI a “B+” corporate credit rating, a “BB-” rating to the bank facility and a “B-” rating to the notes due in 2015. The two-notch differential between the corporate rating and the note rating was because of the “substantial amount of secured debt” in OSI’s structure, S&P said.
“The ratings on OSI reflect the company’s participation in the competitive restaurant industry and a highly leveraged capital structure,” S&P analyst Jackie Oberoi said in a statement. “These factors are offset by the company’s solid position in the casual-dining industry and its history of strong cash flow generation.”
In other OSI news, the company reported a 14.3-percent slide in first quarter net income, to $27.6 million, or 36 cents per share, on increased corporate and operating costs from the same period a year earlier. Total revenues rose 7.5 percent to $1.1 billion for the quarter ended March 31.
