In October 2008, Moody's and Standard & Poor's placed Brinker's credit ratings under review for possible downgrade prompted by the company’s revised earnings expectations for fiscal 2009. Standard and Poor’s has since left EAT’s credit rating unchanged at BBB- (investment grade) with a stable outlook. Moody’s review, however, is ongoing and is focused on EAT’s ability to improve operating performance and debt protection metrics over the next few years.
As a result, EAT’s availability under its $150 million uncommitted credit facility declined to $50 million. If the current rating is confirmed, the availability under this facility will return to $150 million. However, if EAT’s rating is downgraded by Moody’s, the company’s uncommitted credit facilities totaling $250 million will no longer be available. EAT has said it is committed to maintaining its investment grade credit rating and is taking actions to ensure its current investment grade rating is reaffirmed. The review and subsequent outcome will not have any impact on EAT’s availability under a separate $300 million revolving credit facility.
As of last week, EAT expects to receive net cash proceeds of $125.5 million from the sale of Macaroni Grill in fiscal 2Q09, excluding fees and expenses associated with the closing of the transaction, and will use the proceeds to pay down debt. In addition, EAT is significantly reducing capital expenditures for fiscal 2009, eliminating nearly all growth capital spending in fiscal 2010 and is suspending its share repurchase program.
Time will tell…