Moody's cuts Sheridan, rates notes B3

Moody's Investors Service said it lowered the corporate family and probability of default ratings for Sheridan Group, Inc. to B3 from B2 and to Caa1 from B3, respectively, and assigned a B3 (LGD3, 38%) rating to its proposed $150 million of senior secured notes due 2014.

The outlook is stable.

The downgrade incorporates the increase in interest expense compared to the previously proposed transaction, the agency said.

Moody's said that it believes Sheridan will be able to service its debt, but the proposed capital structure affords the company with minimal ability to reduce leverage given expectations for modest free cash flow available for debt reduction and weak growth prospects.

The ratings consider that Sheridan's industry offers minimal growth prospects, lack of scale and financial risks as well as high customer retention in its niche segment and a demonstrated ability to minimize EBITDA erosion through cost cutting to offset weak industry fundamentals and macro conditions, the agency said.

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