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NEW YORK, April 4 (IFR) - Arcos Dorados bonds barely budged Monday on news that the McDonald's franchisee had secured a loan to retire its Real-denominated 2016 bonds.
The company said its Brazilian subsidiary would use most of the R$613.9m (US$167.3m) in proceeds from a four-year loan to pay down the 2016s maturing on July 13.
Arcos Dorados, which has already repurchased some R$48.2m of the R$675m 10.25% notes, secured the loan through Citibank, Itau, Santander, Bank of America and JP Morgan.
The loan, which is backed by credit and debt card receivables, pays Libor plus 450bp and starts amortizing in September 2017.
"We remain focused on reducing our net debt levels as part of our long-term strategic plan, and expect improved operating cash flow generation and the proceeds from our asset monetization strategy to help us achieve this goal," CFO Jose Carlos Alcantara said in a statement.
The 2016s were being quoted on Monday at 92.75-93.75, according to Thomson Reuters data, though a trader spotted the bonds with a wide bid offer spread of 92.50-100.00. The bonds closed at a mid-market price of 93.25 on Friday.
Moody's downgraded Arcos Dorados to B1 from Ba3 last month, citing its deteriorating credit profile and challenging operating environment.
Weakening Latin American currencies have hit the company's adjusted debt-to-Ebitda ratio, which recently spiked to 6 times, the rating agency said.
The company also has US$474m in outstanding 6.625% 2023 bonds, which were being quoted at 96.00-98.00 on Monday, up from 94.00 on March 31, according to Thomson Reuters data.
"Arcos Dorados' currency exposure, high lease-adjusted leverage, concentration of cash flows in a limited number of markets with increasing dependency on its Brazilian subsidiary continue to constrain the ratings," Moody's said. (Reporting by Paul Kilby; Editing by Marc Carnegie)