Moody's cuts Oriental Trading, rates loan B2

Moody's Investors Service said it lowered the ratings of Oriental Trading Co. Inc., including the senior secured rating to B1, and assigned the new second lien term loan a prospective B2 rating.

The outlook is negative.

Moody's said the ratings downgrade is based on the significant increase in leverage that will result from the debt-financed dividend being undertaken, as well as the shift toward a much more aggressive long-term financial policy that this dividend signals.

Previous ratings had incorporated the expectation that Oriental Trading Co. would reduce debt with its free cash flow, and that debt would not increase.

The prospective B2 rating on the second lien loan reflects its junior position in the capital structure, and is subject to receipt and review of final documentation. The negative outlook reflects Moody's concern that the liberalization of the company's financial policy could result in additional debt-financed dividend payments, which would further increase leverage and weaken credit metrics.

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