GPS Hospitality upgraded by S&P Global Ratings to B- on better performance

GPS Hospitality Holding Co. LLC was upgraded today by S&P Global Ratings to B- and a stable outlook, from CCC+ and a negative outlook, after reporting "stabilized" performance through 2020's third quarter, along with improved liquidity. The company's $305 million secured credit facility, including a revolver and term loan, was raised to B- from CCC+ as well.

Ratings noted that the company's operations and credit metrics, which originally weakened earlier in 2020 because of the pandemic, have "slowly improved" through the course of the year. The rating agency said leverage should be in the low-7x area in fiscal 2020 and in the high-6x area in 2021.

Comparable sales increased 3% in 2020's third quarter ended Sept. 30, versus declines of 9% and 6% in the year's first and second quarters, respectively. Ratings said that margins for the 12 months ended Sept. 30 were better than expected. For the year, S&P Global Ratings projects "modest" free operating cash flow of between $15 million and $20 million, including $25 million in capital expenditures.

Ratings believes the company's "liquidity pressure has abated and [GPS'] capital structure is no longer unsustainable over the long term." The rating agency attributes its belief, in part, to the lack of near term maturities.

GPS is a franchisee of Burger King, Popeyes and Pizza Hut restaurants, primarily in the Southeast, Gulf Coast and Northeast regions of the U.S.