Moody's revises American Achievement outlook to negative

Moody's Investors Service said it revised American Achievement Corp.’s outlook to negative from stable due to the increasing liquidity risk driven by its upcoming debt maturities. The B3 corporate family rating, B3-PD probability of default rating and B3 $365 million senior secured notes due 2016 were affirmed.

The company's strategic options are limited following the failed merger with Visant (B3/stable), Moody’s said.

"We think the company will look to address the sustainability of its debt structure within the next quarter or two as the required redemption premium on the notes decreases and the maturity dates approach," Kevin Cassidy, senior credit officer, said in an agency news release.

Moody’s said American Achievement's B3 corporate family rating reflects its small scale, high financial leverage, modest interest coverage, narrow product focus on yearbooks and class rings, regional concentration in the Southern United States, limited organic growth prospects in a mature industry and the agency’s expectation of weak free cash flow over the near to intermediate term.

The rating is supported by American Achievement's strong market position in each of its niche product segments, high customer retention rates, good operating margins and an efficient manufacturing footprint, the agency added.

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