Moody's rates CPI Holdco notes Caa1, cuts senior rating

Moody's Investors Service said it assigned a Caa1 rating to the proposed $80 million of senior floating-rate notes to be issued by CPI Holdco Inc. and affirmed the existing ratings of its subsidiary, Communications & Power Industries Inc.

In addition, Moody's lowered the senior implied rating to B2 from B1 and the senior unsecured issuer rating to Caa1 from B2 while moving both ratings from Communications & Power to CPI Holdco. The outlook remains stable.

Proceeds from the $80 million floaters are expected to be used to pay a $75 million dividend to the shareholders of CPI Holdco plus related fees and expenses.

Moody's said the ratings reflect significant leverage; the company's exposure to potential changes in government spending policies; the potential for advances in existing technology or new technologies to affect demand for its products; and the company's modest revenue base and limited financial resources compared to its larger industry competitors.

The ratings benefit, Moody's said, from the company's strong market position in diverse end user markets; critical nature of vacuum electron devices in military applications; high barriers to entry; the company's sole provider status on about 50% of sales; stable and recurring revenue stream from spares and repairs which represent more than 50% of sales; broad and established customer base; favorable industry growth trends in key markets; and significant order backlog.

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