Moody's rates WH Holdings notes

Moody's Investors Service said it assigned a B3 rating to the proposed $275 million senior unsecured notes to be jointly issued by WH Holdings (Cayman Islands) Ltd. and WH Capital Corp. as part of Holdings' intended recapitalization; upgraded Herbalife International Inc.'s existing ratings one notch; and left the outlook stable.

The proceeds of the $275 million senior unsecured notes will be used to redeem about $220 million of preferred stock and $52 million of senior notes that had collectively represented the equity capital provided by the private equity sponsors and management as part of the July 2002 leveraged buyout.

Ratings for Herbalife International Inc. were increased, including the $25 million senior secured revolving credit facility due 2007 to Ba3 from B1, the $120 million senior secured term loan due 2008 to Ba3 from B1, and the $165 million of senior subordinated notes due 2010 to B2 from B3.

Moody's said the ratings take into account that Holdings' proposed recapitalization will repay the capital invested by shareholders in July 2002, leaving little remaining shareholder capital at risk. The ratings also are restrained by the substantial operating risks that are associated with selling weight management, nutritional and other ingested products through an independent, multi-level marketing distributor network of more than 1 million people in 58 countries and the high turnover rates characteristic of multi-level marketing companies.

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