Moody's rates Reader's Digest

Moody's Investors Service said it has assigned a Ba1 senior secured rating to Reader's Digest Association's amended bank credit facilities.

The outlook remains negative.

The amended facilities will consist of a new $200 million term loan A due November 2007, an existing term loan B due 2008 that the company intends to pay down to $185 million, and a five-year revolver maturing in 2006. The company refinanced the existing term loan A and a portion of its term loan B earlier this year with $300 million in senior unsecured notes.

Now, with only $437 million in senior secured bank debt, the company plans to use proceeds from the sale-leaseback of its Westchester, N.Y, headquarters to pay down the revolver.

Moody's said that while the company might gain some relief from bank lenders on limitations for dividends and share repurchase activity as a result of lower amounts of senior secured debt, Moody's believes the company will continue to conserve capital until the company's operating performance and balance sheet improve.

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