Moody's: Terphane cut to negative, add-on rated B3

Moody's Investors Service said it assigned a B3 rating to Terphane Holding Corp.'s $30 million add-on to its 12½% fixed-rate senior secured notes due 2009 and affirmed existing ratings.

Moody's affirmed Terphane's B3 rated $46.5 million 12½% guaranteed fixed-rate senior secured notes due 2009 and $7 million guaranteed floating-rate senior secured notes due 2009, B3 senior implied rating, Caa2 senior unsecured issuer rating and SGL-4 speculative grade liquidity rating.

Concurrently, Moody's changed the outlook to negative from stable reflecting concern about increased financial leverage resulting from this proposed second decapitalization consisting of an additional $26 million distribution to its investor group, led by Rhone Capital I LLC (bringing the total dividend paid to approximately $56 million in less than one year).

Moody's said the negative outlook incorporates the aggressive posture of the sponsors and the company's fiscal policies, notably given Terphane's already fragile financial condition leaving it vulnerable to potential economic downturn.

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