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December 12, 2007 |
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EL POLLO LOCO: Court Decision Prompts S&P's Negative CreditWatch Standard & Poor's Ratings Services has placed its ratings on the El Pollo Loco Inc., including the 'B-' corporate credit rating, on CreditWatch with negative implications. This action follows a decision by the United States District Court in Texas in the trademark dispute between El Pollo Loco S.A. de C.V. (El Pollo Loco-Mexico) and El Pollo Loco Inc. in which the court awarded El Pollo Loco-Mexico damages of US$20.3 million. El Pollo Loco announced its intentions to appeal the ruling, but the company would likely have to post collateral for bond to the approximate amount of the damages during the appeal process, which could greatly limit its liquidity position. At the end of the company's third quarter on Sept. 30, 2007, El Pollo Loco had US$6.1 million in cash and US$17.4 million of available borrowings on its US$25 million revolving credit facility. This facility also has a US$15 million LOC sub-limit and as of Sept. 30, 2007, available LOC was US$7.4 million. "Therefore, if El Pollo Loco needed to post a LOC as collateral, it would need to procure alternative forms of financing in the very near term," said S&P's credit analyst Charles Pinson-Rose. El Pollo Loco -- http://www.elpolloloco.com/ -- pronounced "L Po-yo Lo-co" and Spanish for "The Crazy Chicken," is the United States' leading quick-service restaurant chain specializing in flame-grilled chicken and Mexican-inspired entrees. Founded in Guasave, Mexico, in 1975, El Pollo Loco's long-term success stems from the unique preparation of its award-winning "pollo" -- fresh chicken marinated in a special recipe of herbs, spices and citrus juices passed down from the founding family. |
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