PE Debt Watch (Upgrades and Downgrades)

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. This week the ratings agencies only rated two companies: Aspect Software, backed by American Capital and Golden Gate Capital, and SS&C Technologies, backed by Carlyle Group.

Interesting sidenote: Yesterday a banker told me that, when considering what how much debt to put on a company in new LBOs, debt providers are telling the potential buyers of debt to due their own diligence on the company instead of buying based on the rating alone. Obviously since the financial collapse, the ratings agencies haven’t been seen as very reliable, but I’m wondering if they’re very relevant to buyout pros today or not. Do any of you not really care about ratings on your portfolio companies?

Company: Aspect Software Inc.
Sponsor: American Capital and Golden Gate Capital
Action: Moody’s upgraded the company’s corporate family rating to B2 from B3 pending closing of their proposed new debt facilities.
Highlight: “Maturities have also been pushed out to May 2014 from September 2010 for the revolver and to May 2016 from July 2011 for the new first lien term loan.”

Company: SS&C Technologies
Sponsor: Carlyle Group
Action: S&P raised its corporate credit rating on Windsor, Conn.-based financial software provider SS&C Technologies Inc. to BB- from B+.
Highlight: “The upgrade reflects positive operating trends. The IPO also provides for enhanced liquidity and reduced leverage as well as an exit strategy for the sponsors that, in our view, does not impair credit quality. The company will use approximately $72 million of the $134.8 million of IPO proceeds to redeem a portion of its 11¾% senior subordinated notes, pushing adjusted pro forma leverage to the 3.1x area.”

View Past Downgrade and Upgrade Lists Here