Moody's Investors Service assigned a Ba3 rating to Collins & Aikman Products Co.'s new $50 million senior secured bank term loan "D" and confirmed its existing rating of Ba3 on the company's $575 million senior secured bank credit facilities. That deal includes a $250 million revolver, $100 million term loan "A", a $125 million term loan "B", and a $100 million term loan "C". Lisa Matalon, senior analyst at Moody's, pointed to the expected impact of deterioration of both the automative market and more general economic environment as factors prompting the updated ratings and negative outlook the agency has on the company.
Moody's believes these trends could potentially impair C&A's sales and margins throughout 2001 in excess of pro forma estimates. Since Moody's last report on the company, Matalon explained that intensified market uncertainty exists regarding the length and depth of the automotive industry's inventory oversupply problems in light of a dramatic decline in consumer confidence levels. In addition, Moody's is concerned about the difficulty of quantifying C&A's sales volume and profits in 2001 as numerous OEM plant closures occurred with limited advance notice to suppliers. Moody's also views the company's continued growth through acquisition strategy as potentially financially risky.
The newly assigned rating as well as the confirmed ratings reflect Moody's belief that pro forma leverage remains high and interest coverage remains low for the company's rating category. C&A's disappointing fourth quarter 2000 results are expected by Moody's to directly increase the company's pro forma debt levels.
On a positive note, the company told the market that equity investor Heartland Industrial Partners has signed a definitive purchase agreement to acquire 59.8% of all the common stock. "It's encouraging because it puts fresh blood into the company," said Matalon.