Moody's lowers Workflow

Moody's Investors Service said it downgraded Workflow Management, Inc.'s corporate family and probability-of-default ratings to Caa3 from Caa1, its senior secured first-lien revolving credit facility due 2010 and senior secured first-lien term loan facility due 2011 to Caa1 (LGD2, 28%) from B2 (LGD2, 27%) and its senior secured second-lien term loan facility due 2011 to Ca (LGD5, 74%) from Caa2 (LGD5, 71%).

This concludes the review for possible downgrade that began in December 2007, and the outlook is developing.

The downgrade reflects Moody's heightened concern regarding Workflow's squeezed liquidity profile, the probability of near-term payment and covenant defaults, the possibility that management may be forced to consider a complete restructuring of the company's balance sheet if its proposed merger with Workflow and Enterprise Acquisition Corp. is not successfully completed under favorable terms and conditions and an expectation that lenders may receive no more than average recovery in a distress scenario.

The agency said the developing outlook indicates the possibility that Workflow's ratings could be upgraded or the outlook could be changed to positive if Workflow's primary owners issue a firm commitment to continue providing adequate cash equity support or if the merger is successfully concluded. According to management, the merger would give the company an injection of cash sufficient to reduce its debt burden by about $220 million.

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