DBRS Places Cara Operations Limited’s Ratings Under Review with Positive Implications Following Announcement of the Acquisition of Prime

DBRS has today placed the Issuer Rating and Senior Secured Second-Lien Notes rating of B for Cara Operations Limited (Cara or the Company) Under Review with Positive Implications. The action follows Cara’s announcement of its acquisition of Prime Restaurants Inc. (Prime) from Fairfax Financial Holdings Limited (Fairfax) and the investment of Fairfax in Cara (the Transaction).

The Transaction is expected to improve Cara’s overall business profile, as it solidifies Cara’s position as the leading food service operator in Canada. The acquisition of Prime will add 145 restaurants under the brands of East Side Mario’s, Casey’s, as well as Prime Pubs (under the operating banners of Fionn MacCool’s, D’Arcy McGee’s, Paddy Flaherty’s and Tir nan Óg) and the Bier Markt, bringing Cara’s total restaurant count to 843. DBRS expects the Transaction will benefit Cara by increasing revenue and EBITDA by approximately 15%, as well as allowing the Company to diversify into the pub business.

Cara’s financial profile and outlook is expected to improve with the investment from Fairfax. This, combined with the benefits to the business from the acquisition of Prime, may result in a positive rating action such that Cara’s Issuer Rating would be more consistent with the BB range.

In its review, DBRS will focus on (1) the business risk profile of the combined entity, including the risks associated with integration; (2) Cara’s financial risk profile on a pro forma basis; and (3) the Company’s longer-term business strategy and financial management intentions.

DBRS will proceed with its review as more information becomes available, and aims to resolve the Under Review status by the closing of the Transaction.

Notes:
This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology is Rating Companies in the Merchandising Industry, which can be found on our website under Methodologies.