Moody's rates Quality Distribution note add-on Caa1

Moody's Investors Service said it assigned a Caa1 (LGD4, 59%) rating to Quality Distribution, LLC's $50 million add-on to its existing $85 million of senior unsecured notes due January 2012.

The agency also downgraded the company's senior unsecured regular bond rating to Caa1 (LGD4, 59%) from B3 (LGD4, 52%), affirmed the corporate family and probability-of-default ratings at B3, affirmed the senior subordinated regular bond rating at Caa2 (LGD5) and changed the loss-given-default rate assigned to the senior subordinated notes to 88% from 84%.

The outlook was changed to stable from positive.

The affirmations follow Quality's announced plan to fund the acquisition of Boasso America Corp. via the $50 million add-on and by refinancing the existing $75 million senior secured revolving credit facility and $64.4 million senior secured term loan B with a new $225 million asset-backed revolving credit facility (not rated).

The agency said the downgrade of the senior notes rating results from the application of Moody's loss-given-default rating methodology to the post-transaction debt structure, in which the relative share of senior secured debt and of senior unsecured debt has increased.

The stable outlook reflects the agency's concern that potentially weaker demand from North American customers and cost pressures could hinder the company's efforts to delever over the next 12 to 18 months and Moody's view that the positive trend in operating results that prompted the change in outlook to positive in June 2006 has waned.

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