Moody's rates Oreck loans B1, Caa1

Moody's Investors Service said it assigned B1 (LGD3, 34%) ratings to Oreck Corp.'s proposed $20 million first-lien revolving credit facility and $130 million first-lien term loan facility and a Caa1 (LGD5, 82%) rating to its proposed $50 million second-lien term loan facility.

The agency also upgraded the probability-of-default rating to B2 from B3 and confirmed the corporate family rating at B2 and $180 million existing first-lien credit facilities at B2 (LGD3, 31%).

This concludes the review for downgrade begun on Jan. 29, and outlook is stable.

Proceeds from the new facilities will be used to refinance, in full, the company's existing first-lien credit facilities.

The company's ratings had been under review for downgrade due to uncertainty surrounding its breach of financial covenants under the existing facility and the potential adverse impact on liquidity resulting from the breach. The company's liquidity profile has remained adequate, Moody's said, and the terms and conditions of its new credit facilities are expected to provide Oreck with sufficient headroom to remain in compliance with its financial covenants.

The upgrade of the probability-of-default rating is due to the introduction of second-lien debt into the capital structure and the resulting change in the family recovery rate to 50% from 65%.

The agency said Oreck's B2 rating reflects the company's moderate scale in the U.S. household appliance sector, its limited product range and its high financial leverage.

However, the ratings also take into consideration the company's long track record in its multi-channel distribution strategy across wholesale, direct response marketing and its franchised retail network of stores located throughout the United States and the value of the "Oreck" brand and reputation, Moody' said.

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