Moody's Downgrades Mohawk Unsecured Notes Rating

NEW YORK (AP) — Moody's Investors Service on Monday downgraded Mohawk Industries Inc.'s senior unsecured notes rating, after the floor covering maker entered into a $600 million secured ABL revolving credit facility.

Moody's lowered Mohawk's non-investment grade rating of its senior unsecured notes to 'Ba2' from 'Ba1.' The ratings agency affirmed all other existing ratings, and kept the company's outlook as negative.

The ratings agency said the downgrade of the unsecured notes resulted after the Calhoun, Ga.-based company replaced its two unsecured revolving credit facilities with a new 4-year Asset Based Lending revolver. The new facility has security on the company's most liquid assets: inventory and accounts receivable.

"Inclusion of a $600 million secured obligation in the company's capital structure increases the potential loss of unsecured creditors in a default scenario as the ABL lenders would have priority over the unsecured lenders" said Kevin Cassidy, a senior credit officer for Moody's.

Shares of Mohawk added 19 cents to $49.13 in afternoon trading.