Moody's downgrades Liberty Tire

Moody's Investors Service said it downgraded Liberty Tire Recycling Holdco, LLC's corporate family rating to Ca from Caa1, probability of default rating to Ca-PD from Caa1-PD and senior notes to Ca (LGD6) from Caa2 (LGD4). The outlook is negative.

The agency said Liberty Tire's operating performance and cash flows significantly declined in the second half of 2014, and it has limited liquidity. The lower ratings reflect Moody's opinion of a high probability of near-term default as well as a deterioration in expected loss for the company's notes.

The company entered into a forbearance agreement with lenders under its secured revolving credit facility in December. The agreement expires on Jan. 30 and, among other provisions, requires monthly payment of applicable interest; the next scheduled payment is due Feb. 1. The agency said the negative outlook considers the increased likelihood of default as the end of the forbearance period and required payments approach.

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