Moody's rates Home Interiors loan

Moody's Investors Service said it affirmed Home Interiors and Gifts' long-term ratings and assigned a B2 rating to the new senior secured credit facilities. Moody's also changed the outlook to stable from positive.

In its action Friday, Moody's affirmed the company's B2 senior implied rating, Caa1 rated $149.1 million senior subordinated notes due 2008, and B3 unsecured issuer rating. Moody's assigned a B2 rating to the company's $50 million secured revolving credit facility due 2009 and $320 million secured term loan B due 2011.

Moody's said the company's ratings reflect its inconsistent operating performance, thin asset coverage, the discretionary nature of the company's decorative products, the increase in new displayers who are usually less productive than seasoned displayers, and the inherent business risks of a direct seller.

The ratings also consider the good debt protection measures for the rating category despite the increase in leverage as a result of the recapitalization, the strong level of on-balance sheet cash, the company's 40-year history, and the opportunities and risks presented by new business areas including; the new Better Homes and Gardens product line, international growth, and the expansion of in-house manufacturing and Domistyle.

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