Central European Distribution Shares Dropped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of liquor distributor Central European Distribution (NAS: CEDC) fell as much as 10% today.

So what: The market is again worried about Europe today after forgetting about it yesterday, and investors are now concerned about a possible downgrade of the company. Moody's placed its corporate family rating (CFR) and probability of default rating (PDR) under review for a possible downgrade.

Now what: The company's $1.3 billion in debt is a huge overhang, and after missing estimates the past three quarters, investors should be concerned. If rating agencies downgrade the company, borrowing costs can go up, making profitability even harder to come by. I would avoid this stock for now, considering the uncertainty in Europe and the heavy debt load on the balance sheet.

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At the time this article was published Fool contributor Travis Hoium has no position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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