Moody's drops Koosharem to Caa1

Moody's Investors Service said it downgraded Koosharem Corp.'s (dba Select Staffing) corporate family rating to Caa1 from B3 and the probability-of-default rating to Caa2 from B3.

Moody's also downgraded the rating on its first-lien senior secured credit facilities to B3 (LGD2, 24%) from B2 (LGD3, 37%) and the rating on the second-lien term loan to Caa3 (LGD5, 74%) from Caa2 (LGD5, 88%).

The outlook remains negative.

According to Moody's, the downgrade of the corporate family rating reflects Koosharem's high financial leverage, the continued challenging operating environment and weak cash flow generation that constrains liquidity and financial flexibility.

The corporate family rating derives some support from good leverage- and interest-based metrics as well as the potential for the owners to contribute additional capital into the business, the agency said.

The downgrade of the probability-of-default rating reflects that a default under the credit agreement is likely unless the company is able to secure an amendment to current financial covenant levels, execute a material deleveraging of the balance sheet through an equity infusion, or pursue some form of a financial restructuring.

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