Moody's drops Office Depot

Moody's Investors Service said it downgraded Office Depot, Inc.'s corporate family and probability of default ratings to B2 from B1, and the company's senior unsecured notes to Caa1 from B3. Office Depot's speculative-grade liquidity rating was upgraded to an SGL-2 from an SGL-3.

The outlook is negative.

These rating actions conclude the review for possible downgrade initiated on Feb. 26, the agency added, noting that the downgrades of the corporate family and probability of default ratings result from Office Depot's continuing difficulty in navigating the weak operating environment, culminating in a credit profile that is not reflective of a B1 rating.

"While the first quarter outperformed the company's expectations, results were still significantly below the comparable prior year period. The end result was debt/EBITDA increasing to 6.7 times for the latest 12-month period ended March 31, 2009 from 6.3 times at Dec. 31," stated Moody's senior analyst Charlie O'Shea.

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