Libbey Glass Inc. has seen its ratings outlook revised from stable to negative by Moody's Investors Service. Moody's affirmed all other ratings, including the B2 corporate family & probability of default ratings, B2 rating on its second lien senior secured notes, & its SGL-3 speculative grade liquidity rating. The outlook change to negative reflects Moody's expectation for weaker operating performance & credit metrics as a result of the deteriorating macroeconomic environment. Weaker consumer spending will likely continue to pressure demand within its retail/foodservice end markets. The company's results will likely come under further pressure in 2009 by ongoing pension payments & its high interest burden, especially with interest on its senior subordinated secured PIK note turning cash pay in June 2009 with the first cash payment due in December 2009. The SGL-3 rating reflects adequate liquidity, supported by the expectation that internally generated cash flow, cash balances, and ample availability under its asset-based revolver should be sufficient to fund internal needs over the next twelve months. Libbey Glass' B2 corporate family rating reflects the company's leading market position in foodservice glassware, strong brand names, geographic diversification, extensive distribution capabilities, and outlook for continued longer term global growth and profitability improvement, especially in China. However, the ratings are tempered by the company's weak credit metrics resulting from high debt levels and significant interest burden, and weak cash flow due to the ongoing capital intensive nature of its business, interest and pension payments. The following ratings were affirmed: corporate family rating at B2, probability of default rating at B2, second lien senior secured notes due 2012 at B2 (LGD4, 55%), and speculative Grade Liquidity Rating at SGL-3. The rating outlook is negative. The last rating action on Libbey Glass was on 9 June 2006, when Moody's affirmed the company's B2 corporate family rating and assigned a B2 rating on the second lien notes.
