Moody's lowers Arias to distressed

Moody's Investors Service said it downgraded Arias Acquisitions, Inc.'s corporate family rating to Caa2 from B3. Moody's also downgraded the company's senior secured bank credit facilities to Caa2 from B3 and its senior subordinated notes to Ca from Caa2.

The outlook remains negative.

According to Moody's, the rating downgrade and negative outlook reflect the severe downturn in the U.S. housing market, resulting in weak revenue and net losses at Arias over the past couple of years. Moody's said it believes the housing market downturn will last at least until 2009, with any sector recovery likely to be sluggish for some time after that.

The rating agency cited Arias's substantial financial leverage and expressed concern about the firm's ability to comply with financial covenants and to service debt under its current borrowing arrangements.

Moody's said the company took steps to address the housing market slump by paring its work force, consolidating facilities and developing more flexible home warranty products.

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