Libbey Glass: debt ratings downgraded

Moody“s Investors Service on 13 February 2009 downgraded glass tableware manufacturer Libbey Glass Inc.“s debt ratings, including its corporate family and probability of default ratings to B3 from B…

Moody“s Investors Service on 13 February 2009 downgraded glass tableware manufacturer Libbey Glass Inc.“s debt ratings, including its corporate family and probability of default ratings to B3 from B2, and the rating on its second lien senior secured notes to B3 from B2. Libbey“s SGL-3 speculative grade liquidity rating was unchanged. The ratings were placed on review for possible further downgrade. The downgrades reflect the company“s weak operating performance and credit metrics as a result of the challenging macroeconomic environment, as well as Moody“s expectation that weaker consumer spending will likely continue to affect results through at least the 1H of 2009. The company“s preliminary 2008 results show that Libbey“s credit metrics weakened significantly. Given the challenging economic environment, Moody“s is concerned that the glass manufacturer will find it difficult to materially improve the metrics in 2009. The SGL-3 rating reflects adequate liquidity, supported by the expectation that planned cash flow improvement, moderate cash balances, and availability under its asset-based revolver, although declining, should be sufficient to fund internal needs over the next twelve months. The review for possible downgrade will focus on Libbey“s ability to stabilize earnings declines and improve cash flow through recently announced initiatives in a very challenging economic environment. Moody“s will pay particularly close attention to the company“s ability to maintain adequate liquidity over the longer-term, especially in light of higher cash interest payments, as interest on the PIK notes turns cash pay in June 2009, with the first cash payment due in December 2009. The following ratings were downgraded and remain on review for possible further downgrade: Corporate family rating to B3 from B2; Probability of default rating to B3 from B2; and Second lien senior secured notes due 2012 to B3 from B2 (LGD4, 55%). The LGD assessment remains subject to change. The following rating was unchanged: Speculative Grade Liquidity Rating at SGL-3. Moody“s previous rating action on Libbey Glass was on 3 December 2008, when the B2 corporate family rating was affirmed and outlook changed to negative. The principal methodology used in rating Libbey Glass was Global Consumer Durables.