The various "challenges" facing Waterford Wedgwood have led rating agency Moody's to downgrade the company's debt. Moody's said yesterday that it was downgrading Waterford's "corporate family rating" from B3 to Caa1, a rating well within the "junk" category.
The agency has also moved its rating on Waterford's 2010 notes down from Caa2 to Caa3. It said the shift reflected its view that Waterford would "maintain a higher credit risk profile going forward".
The outlook on both ratings is negative, with Moody's noting the market for Waterford's products remains "under pressure" and that the firm's restructuring programme is not yet complete.
Waterford has been restructuring for several years, most recently raising almost €60 million from shareholders for working capital.
Moody's noted the firm's success in this restructuring but also pointed to expected low profitability over the medium term.
"There continues to be a degree of execution risk associated with the cost reduction programme in the context of the company's high financial leverage," the agency said in a note.
The agency highlighted what it sees as "ongoing challenges" relating to the restructuring programme, which is designed to strip €90 million per year from costs. It also noted the task facing management, which must strengthen profitability if borrowings are to be reduced.
"At this stage upward movement on the rating is unlikely," Moody's noted.
On the positive side, Moody's also pointed to Waterford's strong portfolio of brands and its leading position in the high-end tabletop market.
"Moody's acknowledges the steps undertaken by the company to react to the changing market conditions," it said.
The agency added that an upgrade could come if Waterford were to demonstrate improved operating profits and strong and sustainable cashflow leading to a reduction in leverage.
A move down is possible: "The rating could be moved further down in case of a significant delay in the restructuring programme or if the liquidity profile deteriorates," Moody's said.
