Moody's lowers Mac-Gray notes to B3

Moody's Investors Service said it downgraded Mac-Gray Corp.'s 7 5/8% senior unsecured notes due 2015 to B3 (LGD5, 78%) from B2, lowered the speculative-grade liquidity rating to SGL-3 from SGL-2 and affirmed the corporate family rating at B1.

The outlook is stable.

The agency said the lower speculative-grade liquidity rating reflects the company's constrained liquidity profile following the debt-financed acquisition of Automated Laundry Co., Ltd. and the subsequent reduction in revolver availability at the close of the transaction. The downgrade of the notes reflects lower expected recoveries on them in the event of default because of an increase in senior secured debt in the capital structure following the acquisition, Moody's added.

Nevertheless, the agency said it believes that, for the next 12 months, free cash flow and cash on hand will be sufficient to cover Mac-Gray's modest working capital requirements, relatively stable and predictable capital expenditures and mandatory term loan amortization.

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