Moody's lowers Merrill Corp.

Moody's Investors Service said it downgraded Merrill Corp.'s corporate family and probability-of-default ratings to B2 from B1 and Merrill Communications LLC's senior secured first-lien credit facility rating to B1 (LGD3, 35%) from Ba3 (LGD3, 35%) and senior secured second-lien term loan to Caa1 (LGD5, 86%) from B3 (LGD5, 85%).

The downgrade was prompted by a review of Merrill's annual financial results as well as an evaluation of Merrill's business operating environment, according to the agency.

The B2 corporate family rating reflects the continued overarching exposure of the company's operations to the weak economy, Moody's said.

The rating is supported by Moody's expectation that Merrill will continue to generate modest to breakeven amounts of free cash flow and by the significant proportion of revenue that are contracted or expected to recur, the agency said.

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