8 restaurant cos. put on Moody's 'death watch'

Eight restaurant companies, including the parents of Outback Steakhouse and Arby’s, have been included on a list of companies rated by Moody's as the most likely to default on their debts.

In addition to OSI Restaurant Partners and Arby’s Restaurant Group, presumably a predecessor of what’s now Wendy’s/Arby’s Restaurant Group, the 283-company list includes El Pollo Loco Inc.; Perkins & Marie Callender’s Inc.; Chevys and El Torito parent Real Mex Restaurants; and Sagittarius Retaurants Inc., apparently an affiliate of Del Taco and Captain D’s parent Sagittarius Brands.

The roster also lists a company called Rare Restaurant Group LLC, identified as being in the fast-food business, which suggests it is not connected with Rare Hospitality, the steakhouse operator that’s now part of Darden Restaurants.

The list has been posted in its entirety by the financial website SeekingAlpha.com.

Moody’s calls the list The Bottom Rung, but media reports have opted for more colorful slugs, including "company dead pool"; "dead companies walking"; and "the death watch."

Most also note the credibility of Moody’s Investors Service has been called into question by its failure to anticipate the meltdown in mortgage-backed investments. The catastrophic collapse was not foreshadowed by the risk ratings of Moody’s or the two other major financial rating services.

Moody’s is quoted as saying about 45% of the Bottom Rung concerns will default on their debts during the next year. One list-ee, Eastman Kodak, has already blasted the report as “irresponsible” and inaccurate.

Splash fight!!!

After rankling Red Lobster by telling its patrons they’re wasting money, the Captain D’s fast-food chain is kicking more sand in the full-service giant’s face. It announced today that it’s defying a cease and desist letter issued by the larger chain’s parent, the mega-sized Darden Restaurants Inc., to halt a commercial that enlists Red Lobster customers in a slam of the brand’s higher prices.

Captain D’s even set up a website, http://www.irefusetoceaseanddesist.com, to rub it in—and ride whatever publicity it can generate with the David-versus-Goliath ploy. The webpage promises a “I refuse to cease and desist” T-shirt to the first 1,000 visitors who register their sympathies with Captain D’s.

“All we wanted to do was show that you could get delicious sit-down quality seafood at a much lower price,” says the star of a video on the site. The spokesman then rips up a copy of the letter. Throughout the video, he’s standing in front of a Red Lobster.

The crux of the dispute is a commercial where the same Captain D’s spokesman intercepts people as they come out of a Red Lobster. He invites them to a nearby screened-off area where they’re shown what they could’ve gotten at Captain D’s for what they just paid at Red Lobster. The people are invited to taste the platters spread before them. “That’s the same thing we just ate,” said one of the Red Lobster customers, pointing to the unit behind him.

Captain D’s doesn’t mention that it refused to participate in a review of the commercial by the National Advertising Division of the Better Business Bureau, a step requested on the basis of Darden’s objections. The full-service giant pointed out to NAD that the spot cites what the patrons paid in total at the Red Lobster, including taxes, beverages and tips. Those additional charges aren’t factored into what Captain D’s asserts the Red Lobster customers could’ve gotten at the quick-service chain for the same tab.

The NAD reportedly referred the matter late last year to the Federal Trade Commission.

Captain D’s is a holding of Sagittarius Brands, which also owns Del Taco.