UPDATE 2-Ruth's Hospitality says unable to meet debt covenant

(Adds analysts comments, updates share movement)

By Mihir Dalal

BANGALORE, Jan 12 (Reuters) - Ruths Hospitality Group Inc (RUTH.O) said it will be not able to meet a covenant of its senior credit facility, sending the restaurant operator's shares down 27 percent.

The company said it had a debt of $160.2 million outstanding under its senior credit facility as of Dec. 28 and that it will be in violation of its leverage covenant as of the end of the fourth quarter.

Ruth's Hospitality, which operates upscale steakhouse restaurants, said it was in discussions with its lenders and expects to resolve the situation in the next 30 to 60 days.

"We are concerned (about) Ruth's ability to negotiate a positive outcome amid severe weakness in operating fundamentals," analyst David Tarantino of Robert W. Baird said in a note to clients.

He now sees a fourth-quarter loss of 5 cents for the company versus his earlier estimate of a profit of 2 cents a share. The analyst kept his "neutral" rating and price target of $2 on the stock.

However, analyst Bryan Elliot of Raymond James believes the company will manage to negotiate reasonable terms on its credit agreement.

"The brand is 35 years old. It continues to cash flow exceptionally well despite soft sales results. And therefore, the lenders can clearly see how they get paid back," he told Reuters.