Moody's rates Del Labs notes B2, cuts other ratings

Moody's Investors Service said it assigned a B2 rating to the proposed $185 million floating-rate senior secured notes due 2011 to be issued by Del Laboratories Inc. In addition, Moody's downgraded Del's corporate family rating and its senior subordinated notes, reflecting ongoing operational and cost challenges that may continue to impact sales and profits into fiscal 2006.

The outlook remains negative.

More specifically, Moody's said it lowered the corporate family rating to B3 from B2 and the $175 million 8% senior subordinated notes due 2012 to Caa2 from Caa1. Moody's also affirmed the speculative grade liquidity rating at SGL-4.

Proceeds from the new senior secured notes, plus borrowings under an unrated $75 million interim asset-based revolving credit facility, will be used to refinance Del's existing $250 million senior secured credit facilities.

Moody' said Del's ratings continue to be constrained by challenges in the mass cosmetics market, including weak category growth and fast-changing consumer preferences, which necessitate new product introductions that in the aggregate can involve significant development, promotion and display/capex spending, but still may not be well-received by consumers.

The ratings are supported by the stable and leading market positions of Del's core Sally Hansen and Orajel product lines and by the company's historical track record of growth and innovation, the agency said.

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