The COVID-19 health crisis has been brutal for Bloomin' Brands (NASDAQ:BLMN). The parent company of restaurant chains Outback Steakhouse, Carrabba's Italian Grill, Bonefish Grill, and Fleming's Prime Steakhouse is trading 50% below its yearly highs. And that's after rising 170% in a soaring rebound since the middle of March.

Bloomin' Brands might be a decent long-term buy at these low prices for investors with an appetite for risky turnarounds, but I wouldn't bet the farm on the Outback operator right now. Here's why.

The coronavirus crisis

The company is champing at the bit to reopen its restaurants, and I mean really reopen them. Bloomin' burned roughly $7 million of cash per week when operations were strictly limited to takeout and delivery options. The gradual return to sit-down dining sales is underway, but it's a slow process, and many consumers simply aren't willing to get back into crowded restaurants quite yet.

At the same time, there's a clear risk that the federal and local governments might be rushing the reopening idea and setting up America for another wave of coronavirus infections. This time, the spread would start with 1.7 million confirmed COVID-19 cases and an unknowable amount of undetected infections. There were less than 20,000 U.S. cases when Bloomin' closed its restaurants to on-premises dining.

Photo of a restaurant with no customers.

Image source: Getty Images.

Crushing debt, limited cash

It would take a lot of financial damage to actually kill Bloomin' Brands. After drawing down $376 million from its revolving credit facilities and raising another $192 million from convertible debt notes, the company held a grand total of $595 million in cash reserves in early May.

That being said, the debt load added up to $1.6 billion at that same point, and the company's credit ratings are falling. This wasn't a perfectly healthy business before the pandemic, and Bloomin' was actively exploring "strategic alternatives." That process has been canceled due to the uncertainty of the COVID-19 situation, but the mere fact that the board of directors was considering spinoffs, asset sales, or maybe even a buyout of the whole company raises warning flags.

A hand is throwing a wooden boomerang into a cloudy sky.

Will this one make it back? Image source: Getty Images.

Will Outback make it back?

Sure, you can buy a bit of Bloomin' stock today, but only as a speculative bet on a long-term turnaround. Be prepared for dramatic price drops in the months ahead, and don't be surprised if it takes years before the restaurant sector gets back to relatively normal operations. Only invest money you can afford to lose if things don't work out.

And even then, it's probably better to rely on the long-term value prospects of restaurant chains with cleaner balance sheets, such as Texas Roadhouse (NASDAQ:TXRH) or Olive Garden parent Darden Restaurants (NYSE:DRI). Bloomin' Brands' combination of high debt and falling credit quality is a bit too rich for my blood.