Moody's cuts Coach America

Moody's Investors Service said it lowered Coach America's corporate family rating and probability of default rating to Caa1 and Caa3, respectively, from B3, concluding the review for possible downgrade initiated on Aug. 2, 2010.

Moody's also downgraded the company's $30 million first-lien revolving credit facility due 2013, $50 million first-lien letter of credit facility due 2014, $195 million first-lien term loan due 2014 and $50 million first-lien delayed draw term loan due 2014 to Caa1 (LGD3, 44%) from B2 (LGD3, 40%) and $55 million second-lien term loan due 2014 to Caa3 (LGD6, 90%) from Caa2 (LGD5, 88%).

The outlook is negative.

The Caa1 rating incorporates the expectation of continued high leverage and weak credit metrics due to ongoing softness in macroeconomic conditions including persistent high single-digit unemployment levels, Moody's said.

The Caa3 rating reflects the increased likelihood that the company might have to enter into a restructuring due to the inability to meet current covenant threshold requirements and the need for funding to cover maintenance-related capital expenditures, the agency said.

The negative outlook reflects the view that liquidity is weak and that a restructuring may be needed in the very near term, Moody's added.

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