NEW YORK (The Deal) -- The relaxed covenants on Ruby Tuesday's (RT) new senior credit facility provide more flexibility in the face of deteriorating performance, but the amended debt terms may not be enough to sustain the casual dining chain.
"If the operating performance doesn't improve, liquidity could be a challenge," Moody's Investors Service analyst William Fahy said by phone. "The cash on their balance sheet continues to decline."
Between June 4 and Dec. 3, Ruby Tuesday's cash fell 55%, to $23.6 million from $53 million, Fahy noted.
The Maryville, Tenn., company has replaced its $200 million senior credit facility with a new $50 million senior credit facility and also modified terms on its $53.6 million in mortgage loans, according to its financial report for the quarter ended Dec. 3.The new terms ease the requirements for Ruby Tuesday's leverage ratio and its fixed-charge covenant. These terms, as set out in the report, which was filed on Jan. 13, are structured to be more and more forgiving over the course of the year, a trajectory that suggests lenders expect the company's poor financial performance to continue.
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