Darden Restaurants, Inc.
) has launched a tender offer for $600.0 million of its debt. The
notes in the offer include Senior Notes due 2017, carrying an
interest rate of 6.2% and Notes with maturity in 2021 having an
interest rate of 4.5%. Additionally, Senior Notes having a maturity
date of 2022 and an interest rate of 3.35% along with Senior Notes
due in 2035, carrying an interest rate of 6% are also included in
In addition, Darden has agreed to repurchase $80 million of Senior
Notes due to mature in 2019, carrying an interest rate of 3.79% and
$210 million Senior Notes due in 2024, with an interest rate of
Both these debt repurchases are subject to the completion of the
sale of its Red Lobster restaurants. In May, this year, Darden
announced its plans to sell the struggling seafood chain - Red
Lobster - to private-equity firm Golden Gate Capital for $2.1
billion. The company had then announced that out of the total
proceeds, it will use roughly $1 billion to retire outstanding
Darden to Sell Off Red Lobster
The Zacks Rank #5 (Strong Sell) company has been reeling under
pressure for some time after its fiscal fourth-quarter 2014
earnings missed the Zacks Consensus Estimate. (Read:
Darden Restaurants Misses on Q4 Earnings)
However, we appreciate Darden's plans to spin off Red Lobster. Over
the last few quarters, Red Lobster has been undermining the strong
performance of Darden's other chains. Vending Red Lobster will help
Darden focus on its more profitable brands like LongHorn Steakhouse
and Capital Grille.
Other Stocks to Consider
Some better-ranked stocks currently worth considering in the
restaurant industry include
Chipotle Mexican Grill, Inc.
Jack in the Box Inc.
Red Robin Gourmet Burgers Inc.
). All these stocks sport a Zacks Rank #2 (Buy).
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CHIPOTLE MEXICN (CMG): Free Stock Analysis
DARDEN RESTRNT (DRI): Free Stock Analysis
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