Moody's affirms Del Laboratories

Moody's Investors Service said it affirmed all of the ratings of Del Laboratories, Inc. and changed the outlook to stable from negative.

The change to a stable outlook reflects 1) Del's significant improvement in financial metrics since 2005, 2) the company's successful resolution of a number of operational and logistic difficulties and 3) Moody's expectation that operating performance will continue to improve.

"While Del has successfully achieved a number of significant process improvements over the last year, which have meaningfully impacted overall profitability and financial stability, further work is needed, including the company's ability to demonstrate sufficient financial and reporting controls, "said Moody's Vice President Janice Hofferber.

In addition, Del's accelerated new product development initiatives, while driving strong organic growth in the highly competitive mass cosmetics category, will continue to require significant investment as well as potential risk of inventory problems at a time when the company's leverage remains high, the agency said.

Moody's noted that the following ratings of Del Laboratories were affirmed: corporate family rating of B3, probability of default rating of B3, $185 million floating rate senior secured notes due 2011, affirmed at B1 (LGD 2, 28%), $175 million 8% senior subordinated notes due 2012, affirmed at Caa2 (LGD 5, 81%) and speculative-grade liquidity rating of SGL-3.

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