Moody’s cuts Things Remembered, loans

Moody's Investors Service said it downgraded Things Remembered, Inc.'s corporate family rating to Caa1 from B3, probability of default rating to Caa2-PD from Caa1-PD and senior secured credit facilities to B3 from B2.

The outlook remains negative.

Moody’s said the downgrade reflects Things Remembered's continued weak operating performance and the expectation that the company will be challenged to remain in compliance with its credit agreement without a meaningful improvement in operating performance or an amendment to the credit facility.

The agency expects that revenue declines in the low single digit range, combined with step-downs to the net leverage test and minimal cushion on the interest coverage test, could result in another violation of the company's financial maintenance covenants over the next 12-24 months.

Things Remembered violated its financial maintenance covenants in the first quarter of fiscal 2015, but has since cured the violation with a capital contribution (as allowed per the terms of the credit agreement). The company also amended its credit agreement in September 2014 and loosened the financial covenants, however declining sales and lower margins have once again pressured covenants, Moody’s said.

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