For J.W. Childs, 2007 Didn’t end Fast Enough

The folks at J.W. Childs Associates probably couldn’t wait to kiss 2007 goodbye. In December, Moody’s Investors Service downgraded three different ratings for MAAX Holdings Inc., capping off a string of downgrades for the firm’s portfolio companies last year. J.W. Childs also saw the exodus of six professionals from its staff last year.

Moody’s downgraded MAAX’s corporate family rating from Caa2 to Ca, its senior unsecured discount notes from Caa3 to C and its senior subordinated notes from Caa3 to Ca. A manufacturer and distributor of bathroom fixtures, Montreal-based MAAX has the number one market share position in Canada and the number three market share slot in the United States in the bathtub and shower fixtures market, according to the company’s Web site.

But it wasn’t enough to keep the company’s ratings from slipping. The downgrades came as a result of MAAX’s failure to make its Dec. 15 interest payment on its 9.75 senior subordinated debt notes, due in 2012. The stagnant housing market no doubt hurt the company’s net sales, which for the six-month period ending Aug. 31, 2007 were $221 million, down from $263 million for the same period in 2006. Though the company had a 30-day grace period before the missed payment constituted a default, Moody’s believed MAAX had limited alternatives to secure funds to make this payment or improve its overall liquidity position within the grace period, according to a Moody’s report.

Maax is the latest J.W. Childs portfolio company to wind up with its credit rating in a slump. InSight Health Services Corp. entered then exited Chapter 11 in 2007 after defaulting on its debt payments. And beverage maker Sunny Delight’s debt situation was considered precarious by Standard & Poor’s. The company sold three manufacturing facilities in a sale-leaseback deal last year for a $58 million cash infusion.

Adding to the Boston-based buyout shop’s woes in 2007 was the departure of several key professionals. J.W. Childs Principals James Rhee, Jeffrey Teschke and Mark Tricolli left the firm in July. Two months earlier, Senior Partners Dana Schmaltz and Ted Yun also departed, reportedly to launch their own private equity firm, West Hill Partners LLC. And Senior Associate Ted Yanagi left for buyout shop TA Associates.—J.P.