Moody's cuts Elizabeth Arden to SGL-3

Moody's Investors Service said it lowered the speculative grade liquidity rating of Elizabeth Arden, Inc. to SGL-3 from SGL-2 and affirmed the company's Ba3 corporate family rating and B1 senior subordinated rating.

The agency said the SGL-3 rating recognizes the company's increased utilization of its revolving credit facility to fund acquisitions and, more importantly, the increased reliance on the facility for strategic and financial initiatives other than normal seasonal working capital requirements.

While Moody's expects a significant portion of the revolver to be repaid following the upcoming peak holiday selling season, the agency noted that over the next four quarters, expected cash flow from operations will not be sufficient to repay all of the revolving credit borrowings. In addition, Moody's is mindful that future acquisitions, ongoing share repurchases, inventory challenges in certain retail channels and product categories and heightened brand support spending behind new product launches may result in lower levels of excess cash and/or higher levels of revolver borrowings over the next four quarters.

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