Castle Harlan-backed Burger King chain sees uptick in Puerto Rico

  • Moody’s cites improved earnings at fast food operator
  • Lower gasoline prices, commodity prices help
  • Company’s debt-to-EBITDA ratio falls to 6.0x

It may may operate in financially troubled Puerto Rico, but a Burger King chain backed by Castle Harlan has seen enough of a boost from lower costs to draw a debt upgrade from Moody’s Investors Service.

To be sure, the debt rating of Restaurant Holding Company remains low, but Moody’s analyst William Fahy raised his view of the company by a notch due to “consumer demand for its core products and lower operating costs.”

Restaurant Holding Company has seen improved earnings performance and a lower debt-to-EBTIDA ratio of 6.0x, down from 6.7x EBITDA, according to Moody’s.

Lower gasoline prices and commodity deflation drove an improvement to the company’s performance, earning a stable outlook on its corporate family rating, Moody’s said on March 1.

“The rating is supported by the company’s leading position in Puerto Rico’s quick serve restaurant segment as a result of its exclusive development agreement within Puerto Rico, the strength of the Burger King brand and adequate liquidity,” Fahy said in a note to clients.

The rating change covered a $145 million senior secured term loan and a $10 million senior secured revolver, as well as a $50 million second-lien term loan.

Moody’s upgraded the company’s corporate family rating to Caa1 from Caa2. Debt with a Caa rating is judged to be speculative, of poor standing and subject to very high credit risk, according to Moody’s definitions.

Restaurant Holding Company is owned by BHK Acquisition Corp, which is majority-owned by Castle Harlan. The New York private equity firm lists the company on its website as Caribbean Restaurants LLC, which is the operating unit of Restaurant Holding Company.

Acquired in 2004, Caribbean Restaurants operates 178 Burger King restaurants in Puerto Rico.

Restaurant Holding Company holds an exclusive territorial development agreement with Burger King Corp as the sole franchisee of Burger King restaurants in Puerto Rico, Moody’s noted.

Castle Harlan declined to comment.

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