Moody's downgrades Evenflo

Moody's Investors Service said it lowered WP Evenflo Holdings, Inc.'s corporate family rating to Caa2 from B3 and probability of default rating to Caa2 from Caa1.

Its $40 million senior secured revolving credit facility due 2013 also was downgraded to Caa1 (LGD 3, 43%) from B2 (LGD 2, 25%), along with its $117 million first-lien term loan due 2013 to Caa1 (LGD 3, 43%) from B2 (LGD 2, 25%).

The outlook was revised to negative from stable.

The downgrade reflects a concern that higher resin costs will continue to pressure Evenflo's operating performance, Moody's said.

In addition, topline trends have been weaker than expected due to increased competitive activity and a delayed customer intake of a new product category, the agency said.

Moody's said it is concerned about the company's ability to maintain compliance with the financial covenants governing the credit agreement.

The downgrades also capture a view that the company's liquidity profile is weak not only because of potential covenant issues, the agency said, but also because of limited excess capacity under the revolving credit facility.

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