Moody's may downgrade Heckler & Koch

Moody's Investors Service said it placed Heckler & Koch GmbH's B1 corporate family rating and B1 €120 million senior noted due 2011on review for possible downgrade following the announcement of a proposed €100 million debt issuance in the form of payment-in-kind notes at holding company Heckler & Koch Beteiligungs GmbH.

Proceeds will be used to repay €33 million of existing debt at Heckler & Koch Beteiligungs, to finance a potential €35 million dividend payment to shareholders and for general corporate purposes.

Moody's said its review will encompass an assessment of potential changes in Heckler & Koch's financial strategy, the impact of the new capital structure on the rated entity and any potential new servicing demands on the restricted group that backs the rated debt.

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