S&P downgrades Del Labs

Standard & Poor's said lowered Del Laboratories Inc.'s corporate credit rating and senior secured bank loan to B- from B and senior subordinated debt to CCC from CCC+. The outlook is negative.

S&P said the downgrade is based on the company's weak operating performance in fiscal 2005, which resulted in total debt to EBITDA of more than 8x, and expectations that credit measures will remain weak as the company continues to face a challenging operating environment. Inefficiencies in its supply chain, increased returns and sales incentives, a 1% decrease in sales and rising freight and other costs more than offset the company's cost savings from other initiatives.

The ratings also reflect Del Laboratories' narrow product focus, despite owning the leading consumer brands in both nail care and oral analgesics, and limited geographic diversity, the agency said.

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