Moody's cuts Directed Electronics

Moody's Investors Service said it downgraded Directed Electronics' corporate family rating to B2 from B1 and the probability-of-default rating to B3 from B2 following continued softness in the company's operating performance.

The agency downgraded the $306 million senior secured term loan due 2011 and the $100 million senior secured revolver due 2010 to B2 (LGD3, 34%) from B1 (LGD3, 32%), and placed them under review for further downgrade.

"The downgrade reflects the softness in Directed's operating performance, highlighted by a 42% decrease in satellite radio product sales and the failure to de-lever following the Polk Audio acquisition in September 2006," Kevin Cassidy, vice president and senior credit officer at Moody's, said in a written statement.

"The downgrade also reflects a general deterioration in credit metrics since the Polk acquisition, which Moody's believes will not materially recover in the near term, with adjusted leverage for the 12 months ended September 2007 increasing by more than a turn to over 5 times and interest coverage falling a half-turn to below 2 times," Cassidy said.

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