Moody's downgrades Spectrum Brands

Moody's Investors Service said it downgraded all ratings of Spectrum Brands, Inc., including the corporate family rating to B3 from B2.

Other ratings downgraded include the $300 million senior secured revolving credit facilities to B2 from B1, the $1.2 billion senior secured term loan facilities to B2 from B1, the $700 million senior subordinated notes due 2015 to Caa2 from Caa1 and the $350 million senior subordinated notes due 2013 to Caa2 from Caa1.

The outlook is stable.

Moody's said the downgrade results from continued softness in the performance of the company's battery business due to a combination of increased raw material costs, more efficient inventory management by some of Spectrum's key customers, and the intense competitive operating environment in general. This has resulted in decreased operating cash flow, which in turn has caused leverage to spike to around 7.4x using Moody's standard analytic adjustments.

Considering this downgrade action, there is little short-term potential for upward rating movement, Moody's noted.

Prospectively, upward rating pressure would occur once Spectrum demonstrates that it can sustain leverage levels of below 6.50 times, has put most integration and raw material risk behind it, and begins improving its generation of free cash flow, the agency said.

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