Moody's cuts Park-Ohio

Moody's Investors Service said it lowered Park-Ohio Industries Inc.'s corporate family and probability-of-default ratings to B3 from B2 and its $210 million 8 3/8% senior subordinated notes due 2014 to Caa2 (LGD5, 80%) from B3 (LGD5, 76%).

The outlook remains negative.

The downgrade reflects expectation that Park Ohio's operating performance will deteriorate substantially during 2009 as a result of weakening demand for its products from most of its end markets and could result in further deterioration in credit metrics and liquidity, according to the agency.

The issuer's adjusted debt-to-EBITDA leverage could rise above 7x, Moody's said.

The action also incorporates the company's weakening liquidity position, driven by its eroding excess availability under its asset-based revolver due to declining borrowing base, as well as thinning cushion under its financial covenant as EBITDA continues to deteriorate.

"If Park-Ohio continues to follow its first-quarter negative operating performance trend, the company's ability to remain in compliance with its bank covenant will likely become uncertain," Moody's analyst John Zhao said in a statement.

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