Moody's lowers AmeriQual's outlook

Moody's Investors Service said it affirmed all the ratings of AmeriQual Group, LLC, including its B1 corporate family rating, B1 probability-of-default rating, B2 (LGD4, 63%) senior secured notes and SGL-3 speculative grade liquidity rating.

The outlook has been lowered to negative.

The ratings reflect the issuer's high leverage resulting from the 2005 leveraged recapitalization of the company, along with the sale of a 50% interest of the company to Ares Corporate Opportunities Fund, LP; AmeriQual's small revenue base and customer concentration, which comes from primarily U.S. government contracts; and the volatility of demand inherent in AmeriQual's primary lines of business and its effect on margins and cash flows, Moody's said.

The ratings also consider the company's position as a leading supplier of field rations to the U.S. military, the current strong military contracting environment for operating requirements, consistent supplementary income provided by its long-standing commercial business segment and the company's adequate liquidity profile, the agency said.

The negative outlook reflects Moody's concerns that AmeriQual's near-term operating results will not improve materially from results reported in the fourth quarter of last year and the first quarter of this year.

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