NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) releases research on the potential implications to whole business securitizations (WBS) due to the coronavirus (COVID-19) pandemic.
The unknown duration and spread of the virus are clearly having negative ramifications on restaurant traffic and visits. Such businesses that often rely on whole business securitizations will inevitably be tested by the events related to the ongoing crisis. Many restaurant chains in the major affected areas around the world have seen restaurant traffic drop significantly as consumers have been warned to avoid crowds. In the U.S., the spread of the coronavirus is a rapidly evolving situation where the fear of virus transmission and potential containment efforts will likely result in a cutback on restaurant and in-store visits. According to Black Box Financial Intelligence, an industry data provider, comparable traffic declines continue to worsen for full-service establishments than for limited-service restaurants for the week ending on March 8, down 3.7% and 3.1% respectively. In major affected areas, comparable traffic was down over 10% for the week, with fine dining and upscale dining establishments experiencing even larger declines.
KBRA has identified 19 WBS securitizations in our rated universe, of which restaurants are included in 12 transactions, with the remaining deals consisting of coin counting services, automotive aftermarket, spa services, gym & fitness, early childhood education, restoration, and music performing rights. KBRA continues to monitor the potential rating impacts of COVID-19 on our rated WBS portfolio and is in continuous dialogue with issuers to better understand how recent events will affect the transactions in the short and medium term. Most of the businesses underlying KBRA-rated WBS transactions, including restaurants, have operations that are predominately in the U.S. Several states including New York, New Jersey, California, and Illinois have recently ordered closures of small businesses (e.g., theaters and gyms) and have limited bars and restaurants to takeout and delivery operations to stem the spread of the virus. Even without closure orders, restaurant systems with a focus on sit-down food consumption remain more impacted if consumers choose to stay home, while those businesses that offer various dining options off-premises may experience a smaller impact as consumers may shift toward takeout and at-home options, including delivery.
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KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.