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 agencies focused on Sagittarius Restaurants, Securus Technologies, American Tire Distributors and Integra Telecom.
Company: Sagittarius Restaurants LLC
Sponsor: Charlesbank Capital Partners
Action: S&P said it lowered its corporate credit rating on the company to ‘CC’ from ‘CCC’.
Highlights: This action comes after the company disclosed that its subordinated lender agreed to reduce its claim substantially below face value. “We view this as tantamount to a default, given the current distressed financial condition of the company and since the investor is receiving less than the original promise of the original security,” said Standard & Poor’s credit analyst Charles Pinson-Rose.
Company: Securus Technologies, Inc.
Sponsor: H.I.G. Capital LLC
Action: Moody’s upgraded the company’s corporate family rating to B3 from Caa2 and raised the probability of default rating to B3/LD from Caa2.
Highlights: These actions reflect the pending refinancing of the company’s existing $194 million of second priority senior secured notes and $97.4 million of senior subordinated notes. As a result of the refinancing, approximately $42.7 million of the senior subordinated notes will be exchanged for equity.
Company: American Tire Distributors Inc.
Sponsor: Investcorp, Berkshire Partners and Greenbriar Equity Group (in the process of being sold to TPG Capital)
Action: S&P placed its ratings on the company, including the ‘B’ corporate credit rating, on CreditWatch with developing implications.
Highlights: The ratings on ATD reflect its highly leveraged capital structure; modest, but stable profit margins; and narrow scope of operations. Investcorp S.A. (unrated) controls the privately owned company and is the largest wholesale distributor of passenger car and light-truck tires to the $26.6 billion U.S. replacement tire industry.
Company: Integra Telecom Inc.
Sponsor: Warburg Pincus LLC and BAML Capital Partners
Action: S&P raised the corporate credit rating on the company to ‘B-‘ from ‘CCC+’ .
Highlights: The upgrade to ‘B-‘ from ‘CCC+’ reflects the removal of restrictive financial maintenance covenants with the recently completed refinancing of the company’s term debt. We feel cushion under the covenants in the prior bank loan was tight and it might have been difficult for the company to meet these thresholds on an ongoing basis, especially if Integra experiences execution missteps or accelerated churn.