Moody's rates Norwood loans B2, B3

Moody's Investors Service said it assigned a B2 corporate family and probability-of-default ratings to Norwood Promotional Products, Inc., a B2 (LGD4, 54%) rating to its $135 million first-lien term loan due 2014 and a B3 (LGD4, 69%) rating to its $75 million second-lien term loan due 2015.

The outlook is stable.

Proceeds from the loans, as well as borrowings under a new asset-based revolver and a portion of cash, will be used to refinance existing debt, to pay $42 million to Norwood Promotional Products Holdings, Inc.'s existing lenders that will then convert to preferred equity and to pay related fees, expenses and prepayment penalties.

The agency said Norwood's B2 corporate family rating reflects its high pro forma leverage, thin interest coverage and modest cash flows relative to debt, as well as the company's limited track record of sustainable growth and debt reduction, as revenues have declined over the last several years due to a series of what Moody's described as strategic and operational missteps.

Notwithstanding these risks, the rating is supported by the company's leading position in the promotional products industry, its highly diversified customer base and its strong stable of industry-recognized brand names, Moody's said.

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