New York, September 25, 2009 -- Moody's Investors Service downgraded the speculative grade liquidity rating of Compass Diversified Holding's to SGL 2 from SGL 1 due to our expectation that operating cash flow will remain sluggish in the near term. At the same time, Moody's affirmed all other existing ratings, including the Ba3 corporate family rating and B1 probability of default rating. The rating outlook is stable.
I predicted that CODI would announce an (accretive) acquisition by June 30, 2009, using the proceeds from the spring 2009, secondary. (This is just an example of why one should never believe anything one reads on the internet!)
From the 5/27/09 CC: "Pursuing 1-2 acquisitions over the next 12 months."
From 8/10/09 CC: "An acquisition by end of "09 is a reasonable expectation." Advanced Circuits looking to acquire customer lists. (I believe at least one customer list was acquired in Q2.) Anodyne is looking at a joint venture.
From 9/20/09 WiseInvestorShow: There are buying opportunities in manufacturing companies, particularly cap equip manufacturing and consumer products manufacturing. No timeline provided.
I only bougt 500 shares 2 days ago and wished I had bought more ( maybe I might ). I knew, based on it's similar characteristics to PSEC--strong business model, great management, increasing divy--perfect place in this ever so slowing growth " U "---
Thanks for the posting! It's always good to see what others are saying. Of course in the case of Moodys, aren't they the ones that rated all the subprime AAA?
But in this instance, I think Moodys is correct ... With economically sensitive businesses, cash flow will be below expectations for a while. Even if distributions were to drop to CAD, that would be about a 10% distribution yield, without touching the $100m in cap gains on the books.
The ratings agencies are a joke. The downgrade was from (very good liquidity profile) to good liquidity profile. It's free to register to see the whole release, which I'd recommend doing. They are expecting CODI to resume generating free cash flow by 2010.