Arcos Dorados secures S&P BBB-, solidifies investment-grade profile
Rhea-AI Filing Summary
Arcos Dorados (NYSE: ARCO) obtained an initial long-term issuer rating of “BBB-” with a Stable Outlook from S&P Global Ratings. The agency cited the Company’s:
- Leading QSR market share in Latin America and exclusive McDonald’s Master Franchise Agreement, recently renewed through 2044 with a 20-year option.
- Conservative leverage, with S&P-adjusted debt/EBITDA ≈ 2.0x and FFO/debt ≈ 35%.
- Sound liquidity, no near-term maturities and committed credit facilities.
- Geographic diversification and ability to endure a potential Brazilian sovereign stress scenario.
This is Arcos Dorados’ second investment-grade rating, following Fitch’s upgrade to “BBB-” in January 2025, giving the Company full investment-grade status. Both agencies emphasized prudent financial policy, strong operating performance and a comfortable debt schedule. Management views the dual ratings as validation of its disciplined capital structure and long-term strategy.
Positive
- S&P assigned inaugural investment-grade rating of “BBB-” with Stable Outlook.
- Full investment-grade status now confirmed by both S&P and Fitch.
- Conservative leverage: S&P-adjusted debt/EBITDA ≈ 2.0×; FFO/debt ≈ 35%.
- Renewed Master Franchise Agreement with McDonald’s valid through 2044 plus 20-year option.
Negative
- None.
Insights
TL;DR: Second “BBB-” rating secures full investment grade, underscoring low leverage and ample liquidity—clearly positive for ARCO’s credit profile.
S&P’s inaugural rating aligns with Fitch’s January action, confirming ARCO’s creditworthiness at the lowest investment-grade notch. Key credit metrics—2.0× adjusted debt/EBITDA and 35% FFO/debt—sit comfortably within IG thresholds, while the renewed Master Franchise Agreement through 2044 locks in brand access for two decades. The stable outlook and absence of near-term maturities reduce refinancing risk. From a bondholder perspective, tighter spreads and broader institutional demand are likely; equity holders benefit indirectly via lower financing costs and strategic flexibility.
TL;DR: Dual IG ratings broaden investor base and may lower cost of capital; operational dominance in LATAM underpins credit strength.
Achieving full investment grade allows ARCO to access IG-only mandates and EM crossover funds, expanding liquidity for future debt issuance. S&P’s stress test on Brazil—ARCO’s largest market—suggests resilience, mitigating sovereign-linked volatility. The renewed 20-year McDonald’s agreement locks in brand equity and supply-chain advantages, supporting cash-flow visibility. With leverage at 2.0×, management retains headroom for growth or shareholder returns without jeopardizing ratings. Overall impact is materially positive for both debt and equity investors.
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
What rating did S&P assign to Arcos Dorados (ARCO)?
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16
OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of July, 2025
Commission File Number: 001-35129
Arcos Dorados Holdings Inc.
(Exact name of registrant as specified in its charter)
Río Negro 1338, First Floor
Montevideo, Uruguay, 11100
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
| Form 20-F | X | Form 40-F |
ARCOS DORADOS HOLDINGS INC.
TABLE OF CONTENTS
| ITEM | |
| 1. | Press Release dated July 31, 2025 titled “Arcos Dorados Achieves Full Investment Grade with S&P’S Initial Rating of ‘BBB-’” |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Arcos Dorados Holdings Inc. | |||
| By: | /s/ Juan David Bastidas | ||
| Name: | Juan David Bastidas | ||
| Title: | Chief Legal Counsel | ||
Date: July 31, 2025
Item 1
FOR IMMEDIATE RELEASE |
 |
ARCOS DORADOS ACHIEVES FULL INVESTMENT GRADE WITH S&P’S INITIAL RATING OF ‘BBB-’
Montevideo, Uruguay, July 31, 2025 – Arcos Dorados Holdings Inc. (NYSE: ARCO) (“Arcos Dorados” or the “Company”) announced that S&P Global Ratings (S&P) assigned an investment grade long-term issuer credit rating of ‘BBB-’ with a Stable Outlook for the Company. This marks the second investment grade rating received by Arcos Dorados, following Fitch Ratings’ upgrade to ‘BBB-’ in January 2025, thereby achieving full investment grade status.
In its report, the agency highlighted Arcos Dorados’ leading position in the quick service restaurant (QSR) industry in Latin America, its exclusive rights to the McDonald’s brand through its Master Franchise Agreement (MFA), and its consistent track record of maintaining a conservative financial profile. These strengths support stable credit metrics, with S&P-adjusted debt to EBITDA of approximately 2.0x and S&P-adjusted Funds from Operations to Debt near 35%.
S&P also emphasized the strategic benefits of the recently renewed MFA with McDonald’s, valid through the end of 2044, with an additional 20-year renewal option. This agreement grants Arcos Dorados exclusive access to one of the world’s most recognized brands across 20 countries in the region, providing a significant competitive advantage in terms of brand strength, supply chain integration, and access to global operational know-how.
S&P further noted Arcos Dorados’ sound liquidity position, broad geographic footprint, and capacity to withstand a potential Brazilian sovereign stress scenario. The Company’s prudent financial risk management, lack of near-term debt maturities, and access to committed credit facilities further strengthen its credit profile according to the rating agency.
S&P and Fitch both highlighted Arcos Dorados’ operating performance and prudent financial policy as key drivers of long-term credit quality. Fitch pointed to the Company’s continued strong operating performance, good liquidity and comfortable debt maturity profile to support its upgrade in January 2025.
Achieving full investment grade status reinforces Arcos Dorados’ commitment to maintaining a solid financial position and enhances its standing in global capital markets, reflecting strong confidence in the Company’s financial discipline and long-term strategic execution.
Investor Relations Contact
Dan Schleiniger VP of Investor Relations Arcos Dorados daniel.schleiniger@mcd.com.uy |
Media Contact David Grinberg VP of Corporate Communications Arcos Dorados david.grinberg@mcd.com.uy |
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About Arcos Dorados |
Arcos Dorados is the world’s largest independent McDonald’s franchisee, operating in Latin America and the Caribbean. It has the exclusive right to own, operate and grant franchises of McDonald’s restaurants in 20 Latin American and Caribbean countries and territories with more than 2,400 restaurants, operated or franchised by the Company or by its sub-franchisees, that together employ more than 100,000 people (as of 03/31/2025). The Company is also committed to the development of the communities in which it operates, to providing young people their first formal job opportunities and to utilize its Recipe for the Future to achieve a positive environmental impact. Arcos Dorados is listed for trading on the New York Stock Exchange (NYSE: ARCO). To learn more about the Company, please visit the Investors section of our website: www.arcosdorados.com/ir.