Moody's drops Chem Rx to SGL-4

Moody's Investors Service said it downgraded the speculative-grade liquidity rating of Chem Rx Corp. to SGL-4 from SGL-3.

The downgrade to SGL-4 reflects Moody's concern over the company's ability to comply with the financial covenants governing its credit facilities in light of tightening covenants and its declining financial performance.

Additionally, Moody's said it is concerned that earnings may continue to contract given the trend of declining year-over-year EBITDA for the first half of 2008, rising costs, as well as its generally weaker than expected operating performance.

The following ratings remain unchanged: corporate family rating at B2; probability-of-default rating at B2; $25 million senior secured revolving credit facility due 2012 at B1 (LGD3, 38%); $80 million first-lien senior secured term loan due 2013 at B1 (LGD3, 38%); and $37 million second-lien senior secured term loan due 2014 at Caa1 (LGD5, 84%).

The outlook remains negative.

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