S&P cuts Home Interiors

Standard & Poor's said it lowered its ratings on Home Interiors & Gifts Inc., including its corporate credit rating to B- from B, senior secured rating to B- from B and subordinated debt rating to CCC from CCC+. At the same time, S&P affirmed its 2 bank loan recovery rating. The outlook is negative.

S&P said the downgrade reflects weaker-than-expected operating performance for the first half of fiscal 2004 ended June 30 and a limited cushion under financial covenants.

S&P said it believes that without a significant improvement in financial performance in the second half of the year, the firm might need to seek relief from covenant violations under its bank facility for the fiscal year ending Dec. 31.

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