Moody's rates Levitz notes B3

Moody's Investors Service assigned ratings to Levitz Home Furnishings Inc. with the $130 million senior secured notes due 2011 rated B3, a senior implied rating of B3 and a senior unsecured issuer rating of Caa2.

The outlook is stable.

Moody's said the ratings reflect the benefits that the company derives from its well established brand names, its leading market position in its key markets, and its operating scale. These strengths are tempered by the competitive and fragmented nature of the furniture retailing market, the seasonality of the company's earnings and cash flow, and the company's leveraged balance sheet and modest cash flow generation.

Levitz is undertaking a refinancing transaction with proceeds of the new senior secured notes to be used to repay much of the company's existing debt. Concurrent with the notes offering, Resurgence will convert $40.5 million of sponsor notes into a new issue of Levitz preferred stock. The company's existing debt will decrease by about $40 million as a result of this transaction.

The company will have no debt outstanding on a pro forma basis as of June 30 under its new $60 million revolving credit facility. Moody's does not rate the company's revolver.

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