Earlier this week, The Cleveland Leader published Moody's Investors Service new list called the Bottom Rung, which details companies that the ratings agency says are most likely to default on their debts. Moody's estimates that 45 percent of the companies on the list — which includes Arby's Restaurant Group Inc., Krispy Kreme Doughnut Corp. and Sagittarius Restaurants LLC, parent company of the Del Taco and Captain D's brands — will lilkely default on their debts this year.
But those brands aren't taking much stock in the new category.
Yesterday, Arby's announced that its parent company, Wendy's/Arby's Group Inc., had completed the amendment of Arby's senior secured credit facility, adding Wendy's as a co-borrower.
"The amendment enhances our overall financial flexibility and our ability to manage and utilize cash," said Roland Smith, president and CEO of Wendy's/Arby's Group in a press release.
Spokesman Bob Bertini said that the actions had not been finalized when the Moody's rating came out.
Sagittarius' Captain D's response
David Head chairman and CEO of Captain D's said that the list reveals no new information about the company but is a new database created by Moody's.
"Moody's has not changed its existing rating on Sagittarius' debt. It has included Sagittarius among a lengthy list of borrowers — most companies that have broad exposure to significantly weaker consumer spending in the United States — that it is publishing for the first time," he said. "We believe the action is unimportant.
"From a capitalization perspective, we are currently in a solid position. We have ample liquidity both from cash-on-hand and through our revolving credit facility and significant headroom as it relates to our financial covenants."
Head also said he believes Captain D's is well positioned to gain from consumers' "trading down from higher priced casual dining restaurants. Captain D's had a strong 2008 and is currently ahead of our 2009 forecast. Our focus is to continue to deliver a positive guest experience with great service and great food."
Krispy Kreme's response
Krispy Kreme, which was also listed earlier this year in a U.S. News & World Report blog entitled 15 Companies That Might Not Survive 2009, responded with an identical response to the earlier report:
"We believe our future is bright," said spokesman Brian Little. "We have reduced our debt in the last two years by $44 million and currently have in excess of $30 million cash on the balance sheet."
The company continues to open new stores, including one that should open soon in Winston-Salem, N.C., he said. The company also is renovating and remodeling a number of other company stores. International growth continues as well, with recently signed development agreements for stores in China, Malaysia and Turkey.
"Krispy Kreme has been in existence for more than 71 years, and we see no reason why it will not be around for another 71 years and more," he said.
