Moody's downgrades K2 notes

Moody's Investors Service said it confirmed K2 Inc.'s Ba3 corporate family rating and SGL-3 speculative grade liquidity rating, but lowered the company's $200 million 7 3/8% senior unsecured notes due 2014 to B1 from Ba3. The outlook is negative. This completes a review that began on Dec. 21.

The agency said the downgrade reflects the fact that negative cash flows have translated into greater usage of the senior secured credit facilities than Moody's had anticipated, thereby augmenting risks associated with contractual subordination.

The negative outlook reflects the risk that the company may be challenged to improve upon its working capital position and generate positive free cash flow, given past trends and the uncertain prospects of the paintball business, the agency said.

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