Moody's rates Le-Nature's

Moody's Investors Service said it assigned a B2 rating to the secured debt of Le-Nature's Inc. and concurrently lowered the rating on the existing subordinated note to Caa1 from B3.

Specifically, Moody's assigned a B2 rating to the $175 million secured credit facility consisting of a $100 million revolver maturing June 2008 and a $75 million add-on term loan maturing May 2010, and downgraded to Caa1 from B3 the existing $150 million 9% guaranteed senior subordinated notes due 2010.

The outlook is stable.

Proceeds from the $75 million add-on term loan are intended to repay outstandings under the revolver; to retire about $17 million of capital leases; and to pay about $1.5 million in fees.

Moody's said that while initial incremental debt is modest pro forma for the $75 million add-on term loan, the company's ability to further add leverage is noted. Additionally, the ratings reflect a shortfall in Le-Nature's earnings performance relative to Moody's expectations due to a change in distribution strategy for the company's commercial tea business and very high financial leverage as total debt exceeds revenue of approximately $160 million.

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