Moody's may downgrade Head

Moody's Investors Service said it placed Head NV's B2 corporate family rating and the B3 (LGD4, 61%) rating assigned to HTM Sport- und Freizeitgerate AG's senior unsecured notes under review for possible downgrade.

The agency said the review was prompted by the company's announcement of its intention to pay a special dividend of €7.5 million in the form of capital repayment at time when operating performances are expected to come under pressure following a poor winter season. The company does not have full visibility on the expected order flow for the current financial year; nonetheless, Moody's said it would expect operating performances to be negatively impacted during the remainder of 2007 with metrics likely to be below those required for the current B2 corporate family rating.

Moody's acknowledged that Head's key credit metrics have showed an improving trend over the last few years, with financial leverage reduced to 4.6x at the end of December.

The review will focus on the company's ability to absorb the expected lower operating performances following poor snow conditions across Europe, the order flow in the winter division, the outlook for debt protection measures over the intermediate term, the company's liquidity profile and the operating performance of Head's other core businesses.

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