Mega Brands Inc. may have managed to avoid creditor protection with its recent recapitalization plans, but analysts are not buying into a recovery for the embattled toy maker.
Anthony Zicha, analyst with Scotia Capital, dropped his coverage of the company on Monday, citing concerns about the viability of the company's business model.
"In the past three years, the company has lost significant shelf space at major retailers and, in our opinion, has failed to make significant incremental innovations to existing product lines," he said in the note. "Furthermore, reputational risk still remains high."
To wit, Mega reported a 2009 fourth-quarter loss of 60 cents a share, almost double Mr. Zicha's forecasted loss of 33 cents a share.
On Monday, credit rating agency Moody's lowered its probability of default rating for Mega to a D from Caa3 after the company completed its debt-financing plan on March 30th.
"The recapitalization transaction … is viewed as a distressed exchange which is considered a default under Moody's definition," the report said.
And just last week, Benoit Caron with National Bank Financial also dropped coverage.
A quick check on Bloomberg shows Gerrick Johnson with BMO Capital is the last analyst on the Mega Brands beat as of Tuesday. However, the BMO Capital Web site also said that Mr. Johnson is currently "restricted from issuing research on Mega Brands for legal and regulatory reasons."