S&P lowers O'Sullivan ratings

Standard & Poor's said it lowered its corporate credit rating on furniture manufacturer O'Sullivan Industries Holdings Inc. to B- from B and the senior unsecured debt ratings to CCC from CCC+.

S&P also lowered the corporate credit ratings on the company's wholly owned operating subsidiary, O'Sullivan Industries Inc., to B- from B and lowered the subsidiary's subordinated debt ratings to CCC from CCC+. In addition, the subsidiary's senior secured bank loan rating was lowered to B from B+.

The outlook is negative.

S&P said the downgrade reflects lower-than-expected profitability at O'Sullivan as a result of challenging industry conditions in the ready-to-assemble furniture market. As a result, O'Sullivan's credit measures are below S&P's expectations. Given the weak operating environment, the timing of recovery for O'Sullivan is unclear, the agency said.

S&P said the ratings are based on O'Sullivan's highly leveraged financial profile resulting from its 1999 leveraged buyout, the volatile nature of the residential and office furniture industry, and customer concentration. Continued growth in foreign competition has eroded the company's previously solid market position in the U.S. office superstore and mass merchant channels.

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