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Rating Action: Moody's affirms Restaurant Technologies B2 CFR; outlook changed to stable from negativeGlobal Credit Research - 21 Apr 2021New York, April 21, 2021 -- Moody's Investors Service, ("Moody's") affirmed Restaurant Technologies, Inc.'s (Restaurant Technologies) ratings including its Corporate Family Rating (CFR) at B2, and its Probability of Default Rating (PDR) at B2-PD. Moody's also affirmed the ratings on the company's senior secured first lien credit facilities at B1, including its $60 million senior secured first lien revolver due 2023 and $427 million principal amount senior secured first lien term loan due 2025, and the rating on its $100 million senior secured second lien term loan due 2026 at Caa1. The outlook was changed to stable from negative.Today's ratings affirmation and outlook change to stable reflects the company's improved credit metrics amid a challenging operating environment in fiscal 2020, and Moody's expectations for a gradual recovery in revenue and earnings over the next 12-18 months. While Restaurant Technologies' financial leverage remains high, debt/EBITDA leverage declined to 7.5x for the last twelve month period (LTM) ending September 30, 2020 from 8.0x for the same period last year. The company's high level of recurring revenue and stable oil customer installations supported by its concentration in the quick service restaurant (QSR) segment of the foodservice sector, helped to somewhat mitigate the impact from coronavirus related disruptions in the foodservice sector that resulted in lower oil volumes. As a result, Restaurant Technologies' revenue remained relatively stable declining 2% year-to-date through the third quarter period of fiscal 2020 versus the same period last year. In addition, the company's EBITDA (Moody's adjusted) grew around 13% for the LTM September 30, 2020 over the same period last year, supported by cost controls, favorable used cooking oil (UCO) pricing, and contribution from new customers installations.Moody's expects the company's topline and earnings will gradually improve over the next 12-18 months, benefiting from a recovering US economy, a gradual reopening in the foodservice, hospitality, and college/schools sectors throughout 2021, and as the company laps weak oil volumes during 2020. In addition, favorable UCO pricing environment will continue to support profitability over the next 12 months.Moody's took the following rating actions:Ratings Affirmed:..Issuer: Restaurant Technologies, Inc..... Probability of Default Rating, Affirmed B2-PD.... Corporate Family Rating, Affirmed B2....Gtd Senior Secured 1st Lien Bank Credit Facility (Revolver and Term Loan, Affirmed B1 (LGD3)....Gtd Senior Secured 2nd Lien Bank Credit Facility, Affirmed Caa1 (LGD6)Outlook Actions:..Issuer: Restaurant Technologies, Inc.....Outlook, Changed To Stable From NegativeRATINGS RATIONALERestaurant Technologies B2 CFR reflects its relatively small scale with annual revenue under $500 million (net revenue of around $209 million excluding oil pass through), and its high financial leverage with debt/EBITDA at around 7.5x for the 12-month period ending September 30, 2020. The company has concentration in the foodservice/restaurant end markets, and some of its customers are experiencing closures and reduced operations because of the coronavirus outbreak, resulting in lower oil volumes. However, Moody's expects Restaurant Technologies' revenue and earnings will gradually and sequentially improve over the next 12-18 months, supported by a recovering US economy, the gradual reopening in the foodservice sector throughout 2021, and as the company laps weak oil volumes during 2020. The company has high customer concentration with McDonald's, and some commodity exposure related to sales of used cooking oil. The company's adequate liquidity reflects Moody's expectation for limited free cash flow over the next 12-18 months because of a significant interest expense burden and substantial capital expenditures associated with new customer installations. Governance factors include the company's aggressive financial policies under private equity ownership, highlighted by high financial leverage.The rating also reflects Restaurant Technologies' leading market position in the closed-loop oil solutions industry, its deep entrenchment in customers' cooking oil supply chains, the high proportion of recurring revenue driven by delivery and service fees embedded in customer contracts, and its high customer retention rates. The company benefits from its first mover advantage in the market in conjunction with its healthy geographic footprint servicing most major metropolitan areas. Moody's expects the healthy backlog of new customer installations, the continued ramp up of the company's AutoMist product, and favorable pricing trends in the UCO market will support revenue and earnings growth over the next 12-18 months.Environmental factors reflect that the company's closed-loop cooking oil management provides a safer, cleaner, and more efficient way to manage cooking oil than non-closed loop processes. The process promotes sustainability via the reduction of traditional oil container waste and the recycling of used oil to biodiesel and animal feed markets. Social risk factors consider the company's foodservice and hospitality customers are exposed to changes in consumer discretionary spending power and shifts in consumer spending trends such as food at-home and away from home. Moody's regards the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. Prolonged social distancing measures, along with increased unemployment and lower consumer confidence as a result of the coronavirus pandemic, will negatively impact oil volumes.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe stable outlook reflects Moody's expectations that Restaurant Technologies' revenue and earnings will improve as the US economy emerges from the coronavirus downturn, resulting in improving credit metrics over the next 12-18 months. The stable outlook also reflects Moody's expectations that the company will maintain at least adequate liquidity supported by access to its $60 million revolving credit facility due October 2023, which provides financial flexibility to fund growth investments.The ratings could be upgraded if the company grows its revenue scale, sustains debt/EBITDA below 5.5x, and sustains EBITA/interest above 2.0x. A ratings upgrade would also require good liquidity highlighted by consistent positive free cash flow generation.The ratings could be downgraded if the company's revenue or EBITDA margin deteriorates, debt/EBITDA is sustained above 7.0x, or EBITA/interest is below 1.0x. Ratings could also be downgraded if liquidity weakens for any reason, including higher reliance on revolver borrowings, or if the company completes a debt financed shareholder distribution that materially increases leverage.Headquartered in Mendota Heights, Minnesota, Restaurant Technologies, Inc. operates as a closed-loop cooking oil distributor for quick service and casual dining restaurants, grocery stores, and hospitality customers. The company was acquired in 2018 by private equity firm West Street Infrastructure Partners (Sponsor). The company is private and does not publicly disclose its financials. Restaurant Technologies, Inc. generated net revenue of $209.5 million, excluding oil passthrough, for the twelve month period ended September 30, 2020.The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1037985. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Oliver Alcantara Analyst Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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