Moody’s lowers Heckler & Koch

Moody's Investors Service said it downgraded Heckler & Koch GmbH's corporate family rating to Caa3 from Caa2, probability of default rating to Caa3-PD from Caa2-PD and the rating on the €295 million senior secured notes due 2018 to Caa3 from Caa2.

The outlooks remain negative.

Moody’s said the action reflects the recent reduction in Heckler & Koch’s underlying liquidity owing to a marked weakening in the company's operational performance. Unrestricted cash amounted to around €8.3 million as of June 30, representing a new low in the level of Heckler & Koch’s cash balances.

The agency now believes there is a heightened risk the company will be unable to pay the semi-annual interest of around €14 million due on Nov. 15, 2014 in respect of its €295 million bond. Payment will be highly dependent on favorable working capital movements, which can be unpredictable, including the receipt of a €8 million customer payment relating to the completion of a long-term project.

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