Moody's cuts Panolam to Caa1

Moody's Investors Service said it downgraded Panolam Industries International, Inc.'s corporate family rating to Caa1 from B2 and speculative grade liquidity rating to SGL-4 from SGL-2. \par The agency also lowered $215 million senior secured first-lien term loan due 2012 to B2 (LGD2, 25%) from Ba3 (LGD2, 29%), $30 million senior secured first-lien revolver due 2010 to B2 (LGD2, 25%) from Ba3 (LGD2, 29%) and $151 million 10¾% senior subordinated notes due 2013 to Caa2 (LGD5, 79%) from Caa1 (LGD5, 84%).

The outlook remains negative.

The downgrade reflects continuing weakness in the company's end markets, looming covenant issues, historically low return on assets that could lead to asset impairments, negative tangible net worth and weak cash flow from operations, according to the agency.

Ratings are supported by acceptable debt leverage and interest coverage, the agency said.

Adjusted debt-to-EBITDA ratio for the 12 months ended Sept. 30 was 5.5 times.

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