Impact of Darden board reshuffle not immediate: Fitch

by Meat&Poultry Staff
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CHICAGO – Twelve individuals nominated by activist shareholder Starboard Value LP have won seats on the board at Darden Restaurant Inc., according to a preliminary count of shareholder votes.

But the impact of the vote won't immediately affect the chain's credit ratings, Fitch Ratings said. Fitch currently rates Darden's long-term and short-term ratings 'BBB-/F3'.

"Fitch views Darden's newly elected board as highly qualified and recognizes Starboards public intent to maintain and strengthen Darden's investment-grade rating and dividend," the ratings agency said in a statement. "However, Fitch is concerned about Starboard's previous push to monetize Darden's real estate. In particular, any increase in rent expense due to leasing versus owning property would have a negative impact on Darden's rent-adjusted leverage metrics."

Fitch added that future rating actions will include Darden's ability to sustain growth in same-store sales and stabilize margins after three years of negative results. The agency will also review the strategic and financial plans created by Darden's new board of directors and executive leadership.

In August, Darden retained global executive search firm Russell Reynolds Associates to assist in the company's search for a new CEO. Clarence Otis is stepping down as chairman and CEO no later than Dec. 31, and Charles Ledsinger Jr. was appointed independent non-executive chairman of the board.
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