Moody’s cuts Constellation Enterprises

Moody's Investors Service said it downgraded Constellation Enterprises, LLC's corporate family rating to Caa1 from B3, probability of default rating to Caa1-PD from B3-PD and rating on its senior secured notes due 2016 to Caa1 from B3.

The outlook is stable.

Moody’s said the action reflects a weakening of the Constellation's liquidity position caused by the company's recent history of negative free cash flow and increasing reliance on its $33 million ABL revolving credit facility to cover cash shortfalls, most notably for cash interest payments on its $130 million senior notes including the August 2014 payment.

The agency is particularly concerned about the timing of this deterioration in liquidity as free cash flow is expected to be modest or negative despite modest improvements in end markets and the company's efforts to grow revenue in 2015, and this may challenge Constellation's ability to refinance its ABL and senior notes due in the first quarter of 2016 without resorting to a transaction that Moody's would consider a distressed exchange.

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