Moody's may cut Evenflo

Moody's Investors Service said it placed WP Evenflo Holdings, Inc. on review for possible downgrade given concerns regarding the deterioration in the economic environment and its impact on an already challenging liquidity situation at the company.

A modest expense associated with the recently announced recall of the company's Majestic High Chairs made before January 23, 2007 is likely to only exacerbate a difficult circumstance, the agency noted.

Evenflo has very limited flexibility under its financial maintenance covenants, Moody's said, adding that the review will focus on the company's ability to meet its covenants or receive relief through bank amendments or an equity cure.

Affected ratings include the company's B3 corporate family rating, B3 probability of default rating, B1 $40 million senior secured revolving credit facility (LGD3, 33%), B1 $120 million first-lien term loan (LGD3, 33%) and Caa1 $45 million second-lien term loan (LGD5, 77%).

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