Moody's Investors Service today downgraded the Corporate Family Rating (CFR) of Jack-in-the-Box
New York, July 22, 2011 -- Moody's Investors Service today downgraded the Corporate Family Rating (CFR) of Jack-in-the-Box Inc. to B1 from Ba3. In addition, Moody's lowered the senior secured ratings of Jack-in-the-Box to B1 from Ba3 and its Probability of Default Rating (PDR) to B2 from B1. The outlook is stable. Subsequently, Moody's will withdraw all of its ratings for Jack-in-the-Box.
"The ratings downgrade reflects Moody's view that debt protection metrics will not materially improve over the intermediate term as soft consumer spending and a persistently high level of promotional continue to negatively impact operating performance " stated Bill Fahy, Senior Analyst at Moody's. For the twelve month period ending April 17, 2011, leverage was high at about 5.4 times while interest coverage was modest at approximately 1.8 times. "However, the B1 CFR also incorporates Jack-in-the-Box's strong brand recognition, meaningful scale, and good liquidity" stated Fahy.
Moody's Investors Service will withdraw the credit ratings for its own business reasons. Please refer to Moody's Investors Service Withdrawal Policy, which can be found on our website, www.moodys.com.
Probability of Default Rating lowered to B2 from B1
$400 million senior secured revolver due 2015, lowered to B1 (LGD 3, 36%) from Ba3 (LGD 3, 38%)
$200 million senior secured term loan due 2015, lowered to B1 (LGD 3, 36%) from Ba3 (LGD 3, 38%)
The outlook is stable.
The stable outlook reflects Moody's view that the B1 CFR sufficiently captures the credit risk given the expected level of debt protection metrics and liquidity.
The principal methodology used in rating Jack-in-the-Box was Moody's Global Restaurant Industry Methodology, published in June 2011. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009.
The last rating action on Jack-in-the-Box occurred on December 5, 2006, when Moody's downgraded the company's Corporate Family and senior secured ratings to Ba3 from Ba2 and it Probability of Default Rating to B1 from Ba3. The outlook was stable.
Jack in the Box, Inc. operates or franchises 2,220 quick-service hamburger restaurants predominantly in California and Texas, as well as in the Southeast. The company also operates or franchises 549 fast-casual Qdoba Mexican Grill restaurants. Annual revenue is approximately $2.26 billion.