Home Interiors & Gifts $317.5 million "B" loan dropped further to the 91-93 range from the 94 1/2-95 1/2 context, as the market digested the company's recent downgrade from Standard & Poor's. The seven-year term loan, which fell below 92 in August before recovering to the high 90s in September, dipped once again after S&P downgraded the company to B from B-. The rating agency attributed the downgrade to weaker-than-expected operating performance for the first half of this year and to a limited cushion under financial covenants. Three weeks ago, Moody's Investors Service placed Home Interiors on review for possible downgrade, citing deterioration in the company's operating results and a weakening of its financial position (LMW, 11/8).
S&P believes that without a significant improvement in its financial performance, Home Interiors may have to negotiate covenant relief under its credit facility. J.P. Morgan and Bear Stearns lead the debt. The deal was put in place last March as part of a refinancing. Other lenders that signed the credit agreement include GE Capital, UPS Capital and MCG Capital. Home Interiors is a Hicks, Muse, Tate & Furst portfolio company, which took a majority position in the company in 1998. A Home Interiors spokeswoman could not provide comment by press time.