Moody's downgrades Oreck

Moody's Investors Service said it lowered Oreck Corp.'s corporate family rating to B2 from B1, probability-of-default rating to B3 from B2 and first-lien bank facility to B2 (LGD3, 31%) from B1 (LGD2, 29%).

The ratings remain under review for a possible further downgrade.

The agency said the downgrade reflects the adverse financial impact to Oreck of recent operational challenges arising from ongoing disruptions to the company's manufacturing, distribution and call center operations and weaker response to recent direct marketing efforts. The company's headquarters and manufacturing facilities were in areas significantly affected by Hurricane Katrina, and while the company was able to promptly restore operations and resolve insurance claims, ongoing operational challenges have proved more complicated and costly than initially anticipated.

The rating remains under review because recent weaker-than-anticipated performance may result in the company being in breach of financial covenants, and if there is a breach and adequate arrangements are not taken to preserve liquidity, the ratings could be lowered further, Moody's said.

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