Moody's Investors Service downgraded the ratings for WKI Holding Company (World Kitchen) to Caa1 from B2 as the credit continues to actively trade in the secondary market. Approximately $617 million in senior secured credit facilities are affected. Moody's lowered the rating due to uncertainty of the company's restructuring plan. "They're closing down U.S. plants and trying to outsource manufacturing by going overseas. It's a big undertaking," said Nancy O'Connor, v.p. and senior analyst. "After they bought and merged EKCO and General Housewares, they must take the next step, which is closing plants to reduce overhead. It's uncertain whether they'll have additional losses." WKI, based in Elmira, N.Y., is a manufacturer and marketer of household products.
The rating also factors in the company's reduction in inventory numbers as a result of an overlap in products. "With the merger, there was an overlap in products. They're writing off inventory that's been on the books," O'Connor noted. "Discounting inventory affects the margins."
Supporting the rating is the company's production for brand names and its relationship with mass merchants. WKI makes products for companies including Pyrex, Corning Ware, Corelle and Visions. "They're benefiting from those well-known names," O'Connor said. "Mass merchants like K-Mart and Target have extra shelf space."