Oct 1 () - Standard & Poor's Ratings Services said today that it assigned its 'BBB' rating (the same as the long-term corporate credit rating) to Orlando-based Darden Restaurants Inc.'s
proposed $300 million senior unsecured notes due 2022. The company plans to use net proceeds from the note issuances for general corporate purposes, including repaying its 5.625% senior notes due October 2012 and repaying short-term debt.
The ratings on Darden reflect Standard & Poor's view of its business risk profile as "satisfactory," based on its outperformance relative to industry peers and its market share leader position in a very fragmented industry. Accordingly, we expect Darden will continue to grow revenue and profits over the near term from new unit growth. Despite the expected increase in debt from its recent Yard House acquisition, we maintain our view of the company's financial risk profile as "intermediate." This is based on our projection that credit ratios will improve over the next two years, and that Darden's financial policies will remain moderate.
The outlook on Darden is stable, which incorporates our expectation of considerable profit growth leading to credit ratio enhancement over the next two years. However, if profits do not grow as anticipated and credit ratios are static over the near term, we may consider a lower rating. For example, if at the end of fiscal 2013, operating lease-adjusted leverage is still 2.8x or worse, we may consider a lower rating or an outlook change. A positive rating action is not a likely near-term consideration, given the debt Darden has taken on to fund the acquisition.
(For the complete corporate credit rating rationale, see Standard & Poor's research update on Darden, published July 13, 2012, on RatingsDirect.)
RELATED CRITERIA AND RESEARCH
-- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
-- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
RATINGS LIST Darden Restaurants Inc. Corporate Credit Rating BBB/Stable/A-2 New Ratings Darden Restaurants Inc. Senior Unsecured $300 mil. nts due 2022 BBB
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at
. All ratings affected by this rating action can be found on Standard & Poor's public Web site at . Use the Ratings search box located in the left column. (New York Ratings Team)