Moody's rates GNC notes B3, ups loan to B1

Moody's Investors Service said it assigned a rating of B3 to the proposed $150 million senior note issue due 2011 of General Nutrition Centers Inc. (GNC), upgraded the bank loan rating to B1 from B2, and affirmed all other ratings.

The outlook is stable.

Together with excess cash, proceeds from the new debt will be used to pay down $185 million of the term loan.

Moody's said the expectation that sales and debt protection measure trends will remain poor over the medium term, the uncertainty regarding long-term strategy, and the need for continuous product development constrain the ratings. Providing credit support are the belief that the company will obtain the announced bank loan amendment, Moody's opinion that free cash flow will not fall below break-even in spite of continued weak sales, and potential advantages from GNC's position as the leading retailer of vitamin, mineral, & nutritional supplement products.

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