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Related Issuers
Rating Action:

Moody's downgrades Blyth's ratings to B2

Global Credit Research - 15 Sep 2010

New York, September 15, 2010 -- Moody's Investors Service ("Moody's") downgraded the ratings of Blyth, Inc. ("Blyth"), including the company's corporate family rating and probability of default rating to B2 from B1. In addition, the rating on Blyth's $100 million senior unsecured notes due November 2013 was downgraded to B3 from B2. The rating outlook is stable.

The following ratings of Blyth were downgraded (LGD point estimate revised):

- Corporate family rating to B2 from B1,

- Probability of default rating to B2 from B1, and

- $100 million 5.5% Senior Unsecured Notes due November 2013 to B3 (LGD5; 73%) from B2 (LGD5; 74%).

The outlook is stable.

RATINGS RATIONALE

"The downgrade in Blyth's ratings reflects continued material sales declines within the company's PartyLite U.S. and Canadian business due to a deteriorating consultant count, lower consultant productivity, lower discretionary spending and increased competition from other direct sellers," says Moody's Vice President and Senior Credit Officer Janice Hofferber. "Furthermore, sales in PartyLite's European business, which has until recently performed relatively well, have come under pressure from economic weakness in the region as well as a significant decline in the growth rate in active representatives," adds Ms. Hofferber. Blyth is facing other significant challenges including a poor housing and job market that has affected sales of more discretionary purchases of home décor and giftware sales, as well as the secular decline of catalog circulation.

Blyth's B2 rating reflects the competitive nature of the company's direct selling candle business in the U.S. and Canada, recently weakened growth prospects in maturing European markets, and the highly discretionary nature of the majority of its home expressions products that are sold through catalog and internet channels of distribution. Modest leverage, a strong cash position and minimal near-term debt maturities help to offset these risks. Nevertheless, Moody's expects that consumer discretionary spending (even on relatively low priced goods) will remain subdued as the economy recovers slowly and competition for sales consultants will remain intense in its U.S. and Canadian direct selling businesses. While the company's past emphasis on share repurchases and acquisitions has moderated and its dividend policy is now quite conservative, we still expect the company's financial policies to favor shareholders given the large concentration of ownership by the Goergen family.

Moody's could downgrade Blyth's ratings if the company's sales continue to deteriorate. Specifically, ratings could be downgraded if Debt-to-EBITDA exceeded 4.5 times and Free Cash Flow-to-Debt deteriorated to single digit levels. The pursuit of a more aggressive financial strategy or significant deterioration in the company's liquidity profile could also result in a downgrade.

Moody's could revise the outlook to positive and/or upgrade the company's ratings if sales declines moderate and profitability is sustained in all major geographic markets and product categories. In addition, Blyth would need to maintain appropriate financial policies with respect to share repurchases and acquisitions.

For additional information, please refer to Moody's Credit Opinion on Blyth available on www.moodys.com.

The principal methodologies used in rating Blyth, Inc. were Global Packaged Goods Industry published in July 2009, and Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

Headquartered in Greenwich, Connecticut, Blyth, Inc. ("Blyth") designs, manufactures and markets a line of candles and home fragrance products, tabletop heating products, candle accessories and home decor and giftware products under brand names such as PartyLite, Miles Kimball, Colonial Candle, Walter Drake and Sterno. Products are sold through home parties, catalogs, internet and retailers in North America, Europe and Australia. The company's three segments, direct selling, catalog & internet, and wholesale account for approximately 66%, 18%, and 16% of annualized revenues, respectively. Total sales for the last twelve month period ending July 31, 2010 were approximately $926 million.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information, confidential and proprietary Moody's Analytics' information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
Janice Hofferber, CFA
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
John Diaz
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

Moody's downgrades Blyth's ratings to B2
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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