Moody's Investors Service has lowered the rating for the senior unsecured debt securities of Texon International from B3 to Caa1. At the same time, Moody's has also lowered its Senior Implied rating to B3 (from B2) and the Senior Unsecured Issuer rating to B3 (from B2). The outlook for the ratings is negative.

Moody's rating downgrade reflects concerns about continued pricing pressures in the company's business, gross profit margin squeeze in part driven by higher pulp prices and in part attributable to lower-margin bolt-on acquisitions, as well as the company's limited liquidity position.

In the short term, however, Moody's does expect there to be some limited strengthening of gross profit margins as pulp prices (a major raw material cost for Texon) appear to have peaked.

The negative rating outlook reflects concerns about management's ability to smoothly integrate recent acquisitions as well as concerns about the group's limited liquidity position. Failure to improve debt protection measures or any further deterioration in the currently weak liquidity position could lead to further negative rating pressure.

Texon International is based in Leicester, England, and is a global supplier of shoe-insoles, stiffeners, and other footwear materials.