Moody's drops Culligan to Caa1

Moody's Investors Service said it downgraded Culligan International Co.'s corporate family and probability-of-default rating to Caa1 from B3.

The agency lowered the senior secured revolving credit facility and first-lien term loan to B3 (LGD3, 33%) from B2 (LGD3, 33%) and its senior secured second-lien term loan to Caa3 (LGD5, 84%) from Caa2 (LGD5, 84%).

The outlook remains negative.

The downgrade reflects the company's weak financial strength metrics, underlined by high leverage and modestly negative free cash flow in the 12 months ended Sept. 30, and the potential for prolonged weakness in customer demand in 2010 driven by a weak economy and high unemployment, according to the agency.

Ratings are supported by the company's strong brand name, distribution channels marked by one of the largest dealer networks in the industry, and significant geographic and customer diversity, the agency noted.

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