S&P drops Harry & David

Standard & Poor's said it lowered its corporate credit rating on Harry & David Operations Corp. to B- from B.

The agency said it also lowered the rating on the company's $175 million senior fixed-rate notes and $70 million senior floating-rate notes to CCC+ from B-, adding that the recovery rating on these notes remains at 5.

The outlook is stable.

S&P noted that the rating action is based on Harry & David's continued weaker-than-expected operating performance, its belief that the company will remain challenged by the soft U.S. economy, and the likelihood that credit metrics will deteriorate in coming quarters.

According to the agency, the ratings on Harry & David reflect the company's participation in the intensely competitive and fragmented specialty food and gift direct marketing and retailing businesses, very high seasonality of its operations, highly leveraged capital structure, thin cash flow measures, and its belief that weak operating trends will continue.

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