As usual, we have a week’s worth of ratings actions on the debt of LBO-backed companies by Moody’s Investors Service Standard & Poor’s Ratings Services. This week Moody’s rated an “aggressive” dividend recap, a move that seems to be back in vogue and totally uncontroversial again, with as often as we’re seeing them in recent weeks. In other bizarro news, an auto parts company was upgraded. What is this, 2006?
Company: American Axle
Sponsor: Blackstone Group
Action: S&P raised its corporate credit rating on American Axle to ‘B-‘ from ‘CCC+’.
Highlight: “The upgrade reflects our opinion that American Axle’s liquidity has improved and that the company is now less likely to need to financially restructure,” said Standard & Poor’s credit analyst Lawrence Orlowski. Supporting this view is our assumption that light-vehicle production in North America is starting to recover.
Company: Intergraph Corporation
Sponsor: Hellman & Friedman LLC, TPG and JMI Equity
Action: Moody’s downgraded the company’s corporate family rating to B2 from B1, assigned a B1 rating to a new incremental $300 million first lien term loan, and downgraded the existing revolving credit facility and first lien term loan ratings to B1 from Ba3 and second lien term loan rating to Caa1 from B3.
Highlight: The rating downgrades reflect Intergraph’s increased debt leverage from incremental debt issuance as it pursues an aggressive dividend payout. The proceeds from the proposed $300 million incremental debt issuance, along with approximately $50 million of cash from the balance sheet, will be used to pay approximately $350 million in dividends to Intergraph’s shareholders. This action will increase debt leverage by 1.6x, to approximately 5.2x
Company: Duane Reade Holdings
Sponsor: Oak Hill Partners
Action: S&P placed all ratings on the company on CreditWatch with positive implications, including the ‘B-‘ corporate credit rating.
Highlight: The potential upgrade follows the announcement that Walgreens would acquire Duane Reade. “The CreditWatch placement reflects our expectation that Walgreen Co., a higher rated entity, will assume the debt currently outstanding at Duane Reade of about $457 million.”