Moody's changes California Pizza Kitchen outlook to negative

Moody's Investors Service said it affirmed California Pizza Kitchen Inc.'s corporate family rating at B3, probability of default rating at Caa1-PD and $30 million guaranteed senior secured revolver due 2018 and $370 million guaranteed senior secured term loan due 2018 at B2 (LGD2, 29%) and changed the outlook to negative from stable.

"The change in outlook to negative from stable reflects California Pizza Kitchen's weaker-than-expected same-restaurant sales and operating performance that has resulted in debt protection metrics below our previous expectations," Bill Fahy, Moody's senior credit officer, said in an agency news release. "The outlook also reflects our view that soft consumer spending and high level of discounts and promotions from competitors will make it difficult to materially improve debt protection metrics over the intermediate term."

The agency said the B3 corporate family rating reflects California Pizza Kitchen's high leverage, modest interest coverage, continued weak same-store sales performance, modest scale and geographic concentration relative to comparable casual dining concepts.

The ratings are supported by California Pizza Kitchen's high level of brand awareness, various strategic initiatives to reduce costs and enhance the customer experience and adequate liquidity, in Moody's view.

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