Moody's confirms OfficeMax

Moody's Investors Service said it confirmed the Ba2 corporate family and senior unsecured notes of OfficeMax Inc., affirmed the Baa2 rating on the senior notes due 2013 and affirmed the SGL-2 speculative grade liquidity rating. The outlook is negative.

The agency said the confirmation is due to OfficeMax's improved operating performance, spurred by positive same-store sales and improved EBIT margins in its retail division. Operating profit for the first quarter of $142 million and operating cash flow of $133 million, indicate that the company is well-positioned to generate at least $750 million in EBITDA for 2006, which would result in a debt to EBITDA ratio of less than 5x; the ratio is currently 5.5x.

The affirmation of the senior notes, which have been paid down to roughly $17 million, reflects the 106% collateral in the form of the pledge of Aa2-rated securities that are held by a trustee, Moody's said.

The negative outlook reflects the fact that the outlook for the company's turnaround remains somewhat "cloudy," according to the agency.

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