Moody's downgrades Harlan

Moody's Investors Service said it downgraded the corporate family rating of Harlan Laboratories, Inc. to Caa1 from B3 and the probability of default rating to Caa2-PD from B3-PD.

Moody's also said it lowered the rating on the existing first-lien term loan due 2014 to Caa1 from B3 and withdrew the ratings on the proposed first- and second-lien credit facilities due 2016 and 2017, respectively.

The actions were due to an understanding that a refinancing transaction is not proceeding as proposed, Moody's said.

The outlook is negative.

The downgrades reflect Harlan's heightened liquidity and refinancing risk because the refinancing was not completed, the agency said.

Harlan's revolving credit facility expires July 2013 and the remaining debt in the capital structure, a $285 million first-lien term loan, matures in July 2014, Moody's said.

The downgrades balance the heightened probability of default with a view that recovery for creditors in the first-lien term loan would be relatively high in the 70% to 90% range, the agency said.

The ratings also reflect a view that even if the company completes a refinancing prior to the maturity of the term loan, it could be at less attractive terms than the proposed refinancing, potentially hampering the company's ability to generate free cash flow on an on-going basis, Moody's said.

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