S&P lowers Workflow Management

Standard & Poor's said it lowered its ratings on Workflow Management Inc., including the corporate credit rating to B- from B, and removed the rating from CreditWatch, where they were placed with negative implications on Nov. 27.

The outlook is negative.

The downgrade reflects S&P's concerns about Workflow's intermediate-term liquidity position, given the relatively tight cushion against its recently amended financial covenants; the agency's view that amortization payments under the first-lien credit facility will become burdensome again beginning in the first quarter of 2009; and the economic headwinds facing the printing industry, which may affect the company's ability to grow EBITDA in line with forecasted levels.

In order to induce lenders to provide the amendment, and to fund an acquisition, Workflow recently received an equity contribution from its financial sponsor. A portion of this contribution was used to fund scheduled amortization payments on the first-lien credit facility. The agency said that while the equity injection and amendment are supportive to credit quality in the short term, operating performance must improve in 2008 for the company to address debt service requirements in the intermediate term.

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