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Outback shows less distress, investors indicate

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By MICHAEL SASSO | The Tampa Tribune

Published: July 14, 2009

TAMPA - Some investors are signaling they believe Outback Steakhouse's parent company is less troubled than a few months ago.

As of March, bonds issued by OSI Restaurant Partners of Tampa – which owns Outback, Carrabba's Italian Grill, Bonefish Grill and other brands – were trading for just 30 cents on the dollar.

That is a deeply distressed level that showed bondholders were worried the company could default on its debt. Around that time, OSI also appeared on Standard & Poor's' "Bottom Rung" list of 283 companies most likely to default.

In recent months, OSI's bonds have made a comeback.

As of Tuesday, they were trading for about 69 cents on the dollar. Meanwhile, the bonds' "yield-to-market," or the interest rate that the bonds command, has fallen by about half. Since investors usually require a bigger return for holding a risky bond, the drop in bond yield implies they have more confidence in the company.

OSI has been working to increase sales at its restaurants.

It has introduced many new entrees that sell for under $15 while slashing costs. It's too soon to tell how well the new low-price campaign is working because the company's last financial report was for the quarter ended March 31.

As of March, sales at Outback Steakhouses that were open for at least 18 months had fallen by 8.4 percent from the same period a year earlier. Sales had fallen by 7.3 percent at Carrabba's, by 10 percent at Bonefish Grill and by 19.9 percent at the high-end chain Fleming's Prime Steakhouse & Wine Bar.

Reporter Michael Sasso can be reached at (813) 259-7865.

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