S&P gives Mega Bloks loan BB-

Standard & Poor's said it assigned its BB- long-term corporate credit rating to Mega Bloks Inc.

At the same time, S&P said it assigned its BB- rating to the company's $400 million bank loan facility with a 2 recovery rating. The outlook is stable.

The rating reflects the agency's analysis of Mega Bloks' effort to expand into new product categories, reduce its reliance on construction toys and increase economies of scale, noting Mega Bloks' management completed the acquisition of Rose Art Industries Inc.

S&P said the transaction will give Mega Bloks an immediate entrance into the growing U.S. arts and crafts market, while also strengthening its position in other toy categories.

The ratings on Mega Bloks reflect the integration risk resulting from the transaction, customer concentration, seasonal sales and challenging toy industry fundamentals, including a very competitive operating environment and reliance on successful new product introductions, S&P said.

These factors are partially offset by the company's modest debt leverage, good market position within its categories and brand equity, the agency noted.

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