Moody's downgrades Heating Finance

Moody's Investors Service said it downgraded Heating Finance plc's corporate family rating to B3 from B2, its £574 million senior secured credit facilities to B3 (LGD3, 45%) from B2 (LGD3, 45%) and its £100 million mezzanine notes due 2014 to Caa2 (LGD6, 94%) from Caa1 (LGD6, 94%).

The ratings were placed on review for possible further downgrade.

The agency said the downgrade follows the company's release of first-half results for 2007 and reflects Moody's concerns stemming from continued weaker operating performance due to softness in underlying markets, a weaker liquidity profile and lower financial flexibility due to the operating performance, Moody's view of execution risk in restructuring the French business and uncertainty surrounding the timing and outcome of discussions with senior lenders and modification of lending terms.

Normalization of the ratings will depend on successful negotiations with senior lenders, demonstration of a sustainable reversal in the downward trend, a stronger and more certain liquidity position and visibility with regard to restructuring in France, Moody's said.

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