Moody's upgrades Amscan

Moody's Investors Service said it upgraded the proposed first-lien senior secured credit facilities being raised by Amscan Holdings Inc. to finance its acquisition of Party City Corp.

Ratings affected included the $65 million second-lien senior secured eight-year term loan facility, assigned a B3; $85 million senior secured six-year revolving credit facility, upgraded to B1 from B2 and $325 million senior secured seven-year term loan facility, upgraded to B1 from B2;

The following ratings remain on review for possible downgrade pending the close of the acquisition: B1 corporate family rating, B1 $50 million senior secured revolver due 2010, B1 $205 million senior secured term loan B facility due 2012 and B3 $175 million 8.75% senior subordinated notes due 2014.

Moody's said the ratings upgrade reflects a $95 million reduction in first-lien term loan borrowings since the initial transaction rating in November, due to an incremental $30 million equity contribution and the addition of a $65 million second-lien senior secured term loan.

The prospective rating downgrade reflects the weakened financial profile expected to result from the high-priced and mostly debt-financed acquisition, which heightens risks associated with a timely realization of synergies, the retention of non-Party City customers and the stabilization of Party City sales and profits, the agency said.

These risks are moderated in part by the sensible combination of the leading vendor and specialty retailer in the relatively stable party supply market and by the company's well-considered synergy, customer retention and operational strategies.

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