Moody's rates Reddy Ice notes B1, Caa1

Moody's Investors Service said it affirmed Reddy Ice Holdings, Inc.'s corporate family and probability-of-default ratings at B2 and speculative-grade liquidity rating at SGL-3 and assigned a B1 (LGD3, 36%) rating to Reddy Ice Corp.'s proposed $300 million first-lien senior secured notes due 2015 and a Caa1 (LGD5, 85%) rating to its $150 million second-lien senior secured notes due 2015.

The outlook is negative.

The company plans to use proceeds from the first-lien notes to refinance its existing $240 million senior secured term loan due 2012 and for general corporate purposes. The second-lien notes are being offered to existing noteholders in an exchange offer.

Although the speculative-grade liquidity rating has been affirmed, Moody's said it will likely upgrade this rating to SGL-2 upon completion of the transaction as the proposed financing extends the debt maturity profile, increases the cash balance and improves flexibility under financial covenants.

The affirmation of the B2 corporate family rating incorporates the increased pro forma debt levels, continued uncertainty related to the Department of Justice investigation and, given expectations for continued softness in consumer spending and weak housing/construction activity, a belief that product volumes will remain under pressure over the near term, the agency said.

Notwithstanding these risks, the rating is supported by the company's leading market share in the packaged ice industry and favorable geographic footprint, Moody's added.

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