PE Debt Watch (Downgrades & Upgrades)

As usual, we have a week’s worth of ratings actions on the debt of LBO-backed companies from ratings agencies Moody’s Investors Service and Standard & Poor’s Ratings Services.

Mixed bag this week, with a handful of downgrades, one upgrade and two withdrawals, one for “business reasons,” which can mean any number of things, including the company not liking its rating. To this I say, ‘lame.’

Company: Wastequip Inc.
Sponsor: Carlyle Group and Odyssey Investment Partners
Action: Moody’s lowered the company’s corporate family and probability of default ratings to Caa2 from Caa1. In addition, the ratings on the senior secured credit facility and term loan were lowered to B3 from B2.
Highlight: ‘The ratings downgrade reflects Moody’s view that revenues and earnings will remain at relatively low levels and that financial leverage will remain elevated over the near term.”

Company: Targa Resources Inc.
Sponsor: Warburg Pincus
Action: Standard & Poor’s raised its corporate credit rating on Targa Resources Inc. to ‘B+’ from ‘B’.
Highlight: “Targa’s decision to use the proceeds from a new senior secured credit facility, plus cash on hand, to permanently reduce existing debt and a portion of the TRII holding company loan due 2015 largely addresses our concerns regarding Targa’s strategy to deleverage at the operating company and TRII levels.”

Company: Culligan International Company
Sponsor: Clayton, Dubilier & Rice, Inc.
Action: Moody’s downgraded the company’s corporate family rating and Probability of Default rating to Caa1 from B3.
Highlight: The downgrade to Caa1 reflects the company’s weak financial strength metrics, underlined by high leverage and modestly negative free cash flow in the twelve months ended September 30, 2009, and the potential for prolonged weakness in customer demand in 2010 driven by a weak economy and high unemployment.

Company: Motorsport Aftermarket Group
Sponsor: Leonard Green & Partners
Action: Standard & Poor’s lowered the company’s corporate credit rating to ‘CCC’ from ‘CCC+’.
Highlight: “The downgrade reflects Standard & Poor’s concern that MAG’s deteriorating operating performance and rising debt leverage will jeopardize its compliance with bank debt covenants,” explained Standard & Poor’s credit analyst Hal Diamond. “We believe that the recession would cause the company to violate the covenant over the near term, prompting it to seek an equity cure, amendment, or debt restructuring.”

Company: Panolam Industries
Sponsor: Genstar Capital and Sterling Group
Action: S&P withdrew its rating on the company.
Highlight: The withdrawal follows the company’s Chapter 11 filing last month.

Company: Maidenform Brands Inc.
Sponsor: Ares Management
Action: Moody’s Investors Service today withdrew all ratings of the company “for business reasons.”
Highlight: The prior rating action on Maidenform occurred on November 23, 2009 when
Moody’s affirmed the company’s Ba3 corporate family rating with a stable
outlook.

View Past Downgrade and Upgrade Lists Here