Moody's drops Mrs. Fields

Moody's Investors Service said it downgraded Mrs. Fields Famous Brands' corporate family rating to Caa3 from Caa1 and probability-of-default rating to Caa2 from B3.

Also downgraded were the $115 million senior secured notes due 2011 to Caa3 (LGD4, 66%) from Caa1 (LGD4, 66%) and the $80.75 million senior secured notes maturing in 2011 to Caa3 (LGD4, 66%) from Caa1 (LGD4, 66%).

The outlook remains negative.

Moody's said the rating actions reflect the company's weak cash flow generation in the past.

"Despite the relatively solid performance at its Great America Cookie business segment, the overall operating performance of the company has suffered from a shrinking franchisee network due to substantial store closures," Moody's analyst John Zhao said in a written statement.

"Negative same store sales growth caused by declining guest traffic at the Mrs. Fields and TCBY stores also contributed to the underperformance," Zhao said. The agency said the company also saw slashed cash flow from the sale of Pretzel Time and Pretzelmaker businesses in August.

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