S&P cuts Airborne to distressed

Standard & Poor's said it lowered Airborne Health Inc.'s corporate credit rating to CCC+ from B and placed it on CreditWatch with developing implications.

The downgrade follows Airborne's announcement that it is in violation of its total leverage and interest coverage covenants under its bank credit agreement as of its fiscal 2008 first quarter, because of continued weaker-than-expected operating performance and expenses incurred in the settlement of a class action lawsuit filed against previous shareholders relating to deceptive advertising.

Despite Airborne's $15 million in cash on its balance sheet, the agency said it's concerned about Airborne's liquidity and its ability to obtain a waiver and bank amendment in a timely and cost-effective manner given current market conditions.

S&P said that as a result of the covenant violations, the company may be unable to timely file its fiscal year-end April 30 audited financial statements. In addition, the agency said it's concerned about the amount of future covenant cushion under the proposed new covenant levels, given recent negative operating trends and the expectation that additional legal expenses will continue to be incurred during fiscal 2008.

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