Moody's rates Buffets loan B3

Moody's Investors Service said it assigned a B3 (LGD3, 35%) rating to Buffets, Inc.'s proposed $250 million senior secured first-lien term loan due 2015 and affirmed its corporate family and probability-of-default ratings at Caa1 and its $120 million senior secured first-lien term loan due 2012 at B1 (LGD2, 15%).

The outlook was changed to negative from stable.

Proceeds from the new term loan will be used to refinance Buffets' existing $117.5 million senior secured first-lien term loan and $180 million senior secured second-lien term loan.

The agency said the Caa1 corporate family rating reflects the company's high leverage, weak interest coverage, lack of an alternate source of liquidity and continuing poor operating performance as well as weak consumer demand trends in the casual dining segment.

The negative outlook reflects Moody's view that weak consumer spending trends will continue to pressure Buffets' operating performance, which could cause debt protection metrics to remain weak for an extended period and as a result be inconsistent with its current ratings.

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