Moody's rates Quality notes Caa1

Moody's Investors Service said it assigned Quality Distribution LLC's planned $225 million second-lien notes due 2018 a Caa1 (LGD4, 58%) rating. Moody's also affirmed the company's corporate family and probability of default ratings at Caa1 and $16 million 9% subordinated notes due November 2010 at Caa3 (LGD 6, 90%).

The outlook is positive.

The second-lien notes proceeds would replace all of Quality Distribution's senior debt and would reduce subordinated debt to $35 million from $98 million.

The corporate rating reflects high financial leverage, low asset coverage and limited free cash flow against an adequate liquidity profile and the company's strong position within its niche, the agency said.

The assigned rating considers better volumes, possible improvement of free cash flow generation, business risk and competitive position, capital structure and financial risk, and projected performance of the company over the near to intermediate term, Moody's said.

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