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Global Credit Research - 01 Apr 2011
New York, April 01, 2011 -- Moody's Investors Service today assigned a Caa1 rating to Sizzling Platter,
LLC's (Sizzling Platter) proposed $150 million guaranteed
senior secured notes due 2016. Moody's also assigned a Caa1 Corporate
Family Rating and B3 Probability of Default Rating to the company.
The rating outlook is stable.
Proceeds from the proposed note offering will be used to re-finance
$65 million of existing debt, repay $25 million of
preferred equity that is majority owned by Valor Equity Partners,
fund an acquisition, and increase the company's cash balances
to about $31 million from $4 million.
Ratings are subject to review of final documentation. This is the
first time Moody's assigned a rating to Sizzling Platter.
Corporate Family Rating (CFR) at Caa1
Probability of Default Rating (PDR) at B3
$150 million guaranteed senior secured notes due 2016 at Caa1 (LGD
Sizzling Platter's Caa1 CFR reflects Moody's view that the
company's ability to materially improve its very weak credit metrics
during the next 12 to 18 month period will be difficult. Pro forma
debt/EBITDA is about 6.8 times and EBITA coverage of interest is
about 1 time. Also considered is the company's limited product
offering -- the substantial majority of the company's
revenues comes from it's pizza operations -- and very
small scale in terms of revenue. Pro forma annual revenues will
only be about $200 million.
"Following fiscal 2010's slight same store sales decline,
Sizzling Platter's earnings could continue to be pressured by relatively
weak consumer spending trends, and will be exposed to what Moody's
expects will be a period of cost inflation," stated Bill Fahy,
a Senior Analyst at Moody's. "Additionally, price
competition from larger and financially stronger companies --
both pizza centric and traditional quick service restaurants --
have increased their focus towards more value priced product offerings.
This puts them in more direct competition with Sizzling Platter's low
price product strategy," added Fahy.
The stable rating outlook reflects Sizzling Platter's affordable
pizza-centric operations. The stable outlook also considers
that while Moody's expects some earnings growth in response to improving
economic conditions and new restaurant additions, Sizzling Platter's
credit metrics are not expected to strengthen materially in the next 12-18
months. Additionally, although the company plans to operate
without a working capital facility, it will have an unrestricted
cash balance of about $30 million and there will be no material
debt maturities until the proposed notes mature in 2016.
Sizzling Platter's Caa1 CFR is one-notch lower than its B3 PDR,
reflecting the utilization of a family recovery rate of 35%.
The lower than average family recovery rate reflects Sizzling Platter's
all bond capital structure and the covenant-lite nature of the
note indenture, which in Moody's view gives lenders less of an ability
to take prompt action if the company's credit profile deteriorates,
thereby providing lower-than-average recovery values.
The Caa1 rating on the proposed notes reflects the fact that it comprises
the entire funded debt portion of Sizzling Platter's capital structure.
A higher rating would likely require a material and sustained strengthening
of the company's credit metrics -- EBITA coverage
of interest would have to be greater than 1.25 times --
along with a demonstrated improvement in same store sales. A downgrade
could occur if the company's earnings do not show some modest improvement
during the next 12 to 18 month period or if liquidity deteriorates for
The principal methodologies used in this rating were Loss Given Default
for Speculative-Grade Non-Financial Companies in the U.S.,
Canada and EMEA published in June 2009, and Global Restaurant Industry
published in July 2008.
Sizzling Platter is headquartered in Murray, Utah and owns and operates
both the quick service and casual dining restaurants.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
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Please see the ratings disclosure page on our website www.moodys.com
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used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
William V. Fahy
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns Caa1 to Sizzling Platter's secured notes, outlook stable
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