Moody's rates WeightWatchers.com loans Ba3, B1

Moody's Investors Service said it assigned a Ba3 rating to the proposed $150 million first-lien term loan due 2011 and a B1 rating to the proposed $70 million second-lien term loan due 2012 of WeightWatchers.com (WW.com).

The outlook is stable.

WW.com is a 53% owned subsidiary of Weight Watchers International, Inc. Under a redemption agreement entered into in June, the shares of WW.com owned by Artal Luxembourg SA are expected to be redeemed in December for $304.8 million. After the redemption, Weight Watchers International will own 100% of WW.com.

WW.com expects to use the proceeds from the first- and second-lien term loans and about $88.8 million of existing cash to fund the redemption price and related fees and expenses.

Moody's said WW.com's ratings benefit from the strength of the Weight Watchers brand, which results in lower customer acquisition costs than its competitors, a leading market position in the online weight loss industry, a recurring revenue stream from a growing base of subscribers, increasing obesity rates worldwide and solid operating margins.

The ratings, however, also consider the relatively modest revenue base of the company, a short operating history, significant customer churn rates (which the company believes are lower than its competitors) and the potential for new online competitors focusing on alternative diet plans and products, the agency said.

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