Moody's cuts Sotera Defense

Moody's Investors Service said it lowered the ratings of Sotera Defense Solutions, Inc., including the corporate family rating to Caa2 from Caa1.

Following the conversion to equity of Sotera Holdings, Inc.'s $42 million subordinated note in July, the probability of default rating was lowered to Caa2-PD/LD from Caa1-PD.

Moody's said it considers the transaction a distressed exchange and has added a limited default designation to the probability of default rating. After three days, the "LD" suffix will be removed.

Despite reduced leverage from the debt conversion, Moody's said potential for default continues following worse than expected operating performance in the second quarter of 2013, a bank facility financial covenant breach, and revenue pressures stemming from U.S. fiscal austerity.

Fiscal austerity has made the U.S. Department of Defense's equipment reset and upgrade spending less certain, the agency said.

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