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Baker & Taylor Counters Moody’s Scrutiny

27 Mar, 2009 By: Erik Gruenwedel

Baker & Taylor

Baker & Taylor Acquisitions Corp. March 27 denied inference from a Wall Street ratings service that it was in danger of defaulting on its credit obligations or filing for bankruptcy.

Moody’s Investors Services said Charlotte, N.C.-based Baker & Taylor, which has been a mainstay distributor of DVD movies and music CDs for decades, had become vulnerable due to retrenchment of entertainment retail coupled with the distributor’s significant debt and related interest payments.

It lowered Baker & Taylor’s default rating Feb. 20 to B3, with a negative outlook.

Kimberly Kuo, EVP of marketing with Baker & Taylor, said the rating didn’t properly reflect the distributor’s daily operations and instead based its speculative outlook on the economic downturn at the end of 2008.

She said a lot of high-profile companies have joined Moody’s watch list during the recession, including some considered at extreme high-risk to others regarded as more secure. Kuo said the list was fluid and updated regularly.

“We are focusing heavily on working capital, which has helped generate cash, reduce debt levels and maintained the company’s leverage ratio,” she said.  
Baker & Taylor, which is owned by private equity fund Castle Harlan Inc., has been involved with ongoing internal restructuring, which included the departure of Frank Wolbert, SVP of entertainment, last year.

Kuo said the distributor had increased cash flow 25%, including free cash by the end of the current quarter, which ends March 31.

“We have plenty of liquidity ($110 million),” she said. “We are a long way from not paying our bills.”

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