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Moody's Keeps Darden (DRI) Under Review following Red Lobster Spin

May 16, 2014 2:01 PM EDT

Investors Service stated today that Darden Restaurants, Inc.'s (NYSE: DRI) ratings remain on review for downgrade including its Baa3 senior unsecured ratings and Prime-3 short term commercial paper rating following the announcement that the company has agreed to sell Red Lobster for approximately $2.1 billion. For further information, please see www.moodys.com.

Moody's review will focus on 1) Darden's ability to drive sustained improvement in earnings and same store sales growth, predominantly at Olive Garden, 2) the final capital structure at Darden post divestiture, and 3) the company's future financial policies to increase shareholder returns at the detriment of creditors.

"Moody's believes a sustained improvement in Olive Garden's earnings and same store sales performance over the intermediate term could be challenging given soft consumer spending and competitive pressures." stated Bill Fahy, Moody's Senior Credit Officer. "This is of particular concern given that Olive Garden will comprise the substantial majority of Darden's consolidated earnings and be the key credit support for the company, which will be less diversified and smaller in scale post the divestiture of Red Lobster" stated Fahy.

Ratings on review for downgrade are;

- $400 million 4.5% senior unsecured notes due 10/15/2021 rated Baa3

- $500 million 6.2% senior unsecured notes due 10/15/2017 rated Baa3

- $450 million 3.35% senior unsecured notes due 11/1/2022 rated Baa3

- $300 million 6.8% senior unsecured notes due 10/15/2037 rated Baa3

- $150 million 6.0% senior unsecured notes due 8/15/2035 rated Baa3

- $100 million 7.125% senior unsecured notes due 2/1/2016 rated Baa3

- Senior unsecured shelf rated (P)Baa3

- Senior unsecured MTN rated (P)Baa3

- Short term commercial paper program rated Prime-3



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