Moody's downgrades Levitz

Moody's Investors Service said it downgraded the debt ratings of Levitz Home Furnishings Inc., including the senior implied rating to Caa1 from B3, the $100 million class A senior secured notes to Caa2 from B3 and the $30 million class B senior secured notes to Caa3 from Caa1.

The outlook is negative.

Moody's said the downgrades reflect Levitz's continuing poor operating performance in the highly competitive and fragmented residential furniture retailing industry, which resulted in the need to obtain an additional $20 million of capital, a new $20 million term loan and a modification of the terms of the senior secured notes.

The two-notch downgrade of the class A and class B senior secured notes reflects the increased subordination of the notes to the unrated secured revolver and new term loan, which are secured on a first- and second-lien basis, respectively, by inventory and accounts receivable, the agency said.

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