Moody's cuts Easton-Bell to B2

Moody's Investors Service said it downgraded Easton-Bell Sports, Inc.'s corporate family and probability-of-default ratings to B2 from B1 and affirmed the company's speculative grade liquidity rating at SGL-2, $140 million 8 3/8% senior subordinated notes due 2012 at B3 (LGD5, 73%), $70 million senior secured revolving credit facility due 2012 and $333 million senior secured term loan B due 2012 at Ba3 (LGD2, 26%) and Easton Sports Canada, Inc.'s C$12 million senior secured revolving credit facility due 2012 at Ba3 (LGD2, 26%).

The outlook is stable.

The downgrade of the corporate family rating follows the company's announcement that it issued $175 million of senior unsecured PIK notes due 2012 (not rated) at EB Sports Corp., an indirect parent of Easton-Bell. The notes are floating-rate, PIK for life, include an IPO equity clawback and do not benefit from any guarantees. EB Sports Corp. used the net proceeds to pay a dividend to its parent company, Easton-Bell Sports, LLC, which is expected to use the proceeds to make a distribution to its equity holders.

The downgrade reflects Moody's view that the additional $175 million of debt associated with the PIK notes results in consolidated credit metrics that are inconsistent with a B1 ratings profile. The agency said it estimated that the company's pro forma consolidated debt-to-EBITDA ratio will increase to 6.2x.

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