Moody's downgrades Gundle/SLT to SGL-3

Moody's Investors Service said it downgraded Gundle/SLT Environmental, Inc.'s speculative grade liquidity rating to SGL-3 from SGL-2, reflecting the agency's expectation that Gundle/SLT will experience weakened performance in the next 12 months following the expiration of a profitable solid waste contract and increased competition in geotextiles globally.

The downgrade also reflects the company's exposure to volatile resin prices as demonstrated by an inability to pass along these costs effectively in recent months, the consequent deterioration in cash flow and cushions under financial covenants that are expected to be tight following step-downs in the maximum leverage covenant and step-ups in the minimum interest and fixed charge coverage ratios on March 31, 2007, the agency said.

The new SGL-3 rating reflects Moody's expectation that liquidity should be adequate throughout the next 12 months as operating cash flow, combined with cash balances and availability under the company's secured revolving credit facility, should be sufficient to cover capital needs.

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