Moody's lowers Airborne

Moody's Investors Service said it downgraded Airborne Health, Inc.'s corporate family rating to Ca from Caa1, probability of default rating to D from Caa2, and its $20 million first-lien secured revolving credit facility due 2012 and $135 million first-lien secured term loan due 2012 to Ca (LGD4, 64%) from Caa1 (LGD3, 35%).

Moody's said the downgrades follow covenant violations at the end of the company's second quarter and Airborne's failure to pay a principal installment of $3 million on Jan. 31, which constitutes an event of default under the credit agreement.

The outlook is negative.

Despite a greater degree of visibility on the regulatory front following the resolution of legal issues, including follow-on claims by state attorney generals, the agency said it believes that Airborne is not appropriately capitalized to enable the company's new management team to focus on challenging operational issues.

The downgrade also takes into account the company's very small revenue base, very high leverage, undiversified product offering, the potential effects of an economic slowdown on consumer spending, very high seasonality in the category and dependence on larger retail customers for the distribution of its products amid intense competition from a variety of branded and private label products, the agency said.

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