Furniture Brands Downgraded

June 18, 2007  by in UnCategorized   

By Home Furnishings Business in Case Goods on June 2007 Moody’s Investors Service, New York, announced Monday that it has downgraded the rating of Furniture Brands International, St. Louis, in a move that could increase the company’s borrowing costs. After dropping the furniture manufacturer’s ratings from Ba1 to Ba3, Moody’s officials also said it is continuing to review the company for possible further downgrade.

“The downgrade reflects our concerns over the continuing softness across all brands, which has been more severe than originally expected,” said Kevin Cassidy, vice president and senior analyst, Moody’s. “This weakness coupled with the heavy discounting to reduce inventory levels, will result in credit metrics that are no longer consistent with a Ba1 rating, and we do not expect the company credit metrics will return to its previous levels in the next couple of years.”

In May, Furniture Brands said it is in negotiations to amend its credit facilities to gain less restrictive terms. Cassidy said those negotiations could result in increased borrowing costs. In addition, Cassidy said Moody’s ongoing review of Furniture Brands will “focus on our assessment of the company’s new senior management” in view of the recent hiring of Ralph Scozzafava as CEO designate and the announcement that longtime Chairman and CEO Mickey Holliman is retiring. Holliman will relinquish his CEO post on Jan. 1 and step down from his role as chairman on May 1.

According to published reports, Scozzafava will receive a salary of at least $700,000 annually and will also receive company stock and stock options as part of a compensation package. Scozzafava was formerly vice president of commercial operations for gum manufacturer Wm. Wrigley.

Earlier this month, Furniture Brands announced it expects sales in its second quarter to be down by 12 percent, an improvement over an earlier forecast that predicted a 15 percent decline. In April, the company said it is cutting 330 jobs jobs to produce savings of about $13 million a year.