Moody's downgrades Lenox

Moody's Investors Service said it lowered Lenox Group, Inc.'s corporate family rating to B2 from B1, speculative grade liquidity rating to SGL-4 from SGL-3 and D56, Inc.'s 175 million revolving credit facility to B1 (LGD 3, 32%) from Ba2 (LGD2, 18%) and $100 million term loan to B2 (LGD3, 46%) from B1 (LGD3, 30%). Lenox's probability-of-default rating was affirmed at B2.

The outlook remains negative.

The downgrade reflects Moody's concern that Lenox Group's liquidity may be strained over the near term absent further meaningful debt reduction in the fourth quarter either from seasonal cash inflows or asset sales. Lenox Group has reported weaker-than-expected earnings and cash flow year-to-date, largely due to higher production, delivery and distribution costs, inventory management issues and integration costs associated with the acquisition of Lenox, the agency said. Ongoing challenges in the wholesale gift and specialty channel also continue to hurt profitability.

Given the company's weak operating performance to date, it is unlikely that it will be able to meet the target credit metrics the agency set out in May in order for it to maintain its prior rating. Moody's said the company is taking steps to improve its performance, including simplifying its supply chain, reducing the number of stock keeping units by 30%, freezing its pension plan, consolidating office space and selling assets, and the company has reduced term debt by about $17 million year-to-date due to planned asset sales.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.