S&P; Downgrades CKE --Debt Payments Due

Standard & Poor’s lowered its corporate credit and bank loan ratings on CKE Restaurants Inc. on Monday, noting that the nation’s fourth-largest hamburger chain is facing significant debt payments in coming months.

The Anaheim company, struggling with soaring debt from its effort to absorb the Hardee’s chain, failed to comply with certain financial covenants under its line of credit for the period ended Aug. 14. CKE secured waivers but now must pay down $150 million of the debt by Jan. 31, Standard & Poor’s said.

CKE is planning to sell its chain of 125 Taco Bueno restaurants for more than $90 million in cash by the end of December and hopes to sell 90 company-owned Carl’s Jr. restaurants by the end of January to generate another $90 million.

“We’re confident that with all these different transactions we’ll raise the capital needed to pay down our debt,” CKE spokeswoman Suzi Brown said.

But the company “faces substantial risk if the transactions do not close on a timely basis or under the anticipated terms,” Standard & Poor’s said.

The debt-rating agency lowered CKE’s corporate credit rating to single-B from single-B-plus and its subordinated debt rating to triple-C-plus from single-B-minus.

CKE’s debt ratings were also lowered in May.

Earlier this year, the company also announced plans to sell 500 Hardee’s restaurants to help pare its debt. CKE said it hoped to raise about $200 million from the sales. So far, CKE has sold 254 Hardee’s restaurants to franchisees for $73 million.

The company has posted losses for three consecutive quarters, attributing the results largely to the Hardee’s chain.

If the transactions do not materialize as planned, CKE may have trouble arranging alternative financing, “given its weak operating performance.”

Banks also may not be willing to grant another waiver to CKE’s financial covenants because CKE has amended its credit line three times since last Oct. 31, Standard & Poor’s said.

CKE stock, which has lost half of its value this year, closed Monday at $2.94, down 13 cents a share, on the New York Stock Exchange.