As usual, we have a week’s worth of ratings actions on the debt of LBO-backed companies by ratings agencies Moody’s Investors Service and Standard & Poor’s.
This week, in perhaps a sign of more good things to come, we’ve got three upgrades, to companies owned by SCP Private Equity Partners, Diamond Castle Holdings, and Apollo Management. Gotta love those amend & extends.
Another note is that this week we learned from Moody’s that most private equity deals target a B1 rating at completion, which indicates a high leverage tolerance and relatively low default rate. So looking at these companies with the lens of B1 being ideal makes it easier to judge how far gone some of the investments may be. Or, or in the case our three upgrades from this week, of how far they’ve come.
Company: Amkor Technology, Inc.
Sponsor: SCP Private Equity Partners
Action: Moody’s upgraded the company’s corporate family and probability of default ratings to Ba3 from B2.
Highlight: “The two-notch ratings upgrade reflects Amkor’s improved business profile as a result of its broader portfolio of packaging solutions and richer mix of products/services coupled with a lower debt burden and our expectations of more sustainable free cash flow (FCF) generation.”
Company: NES Rentals Holdings
Sponsor: Diamond Castle Holdings
Action: Following the company’s announcement to issue $250 million in senior secured second lien notes and extend and amend its existing SBL loan, S&P placed its ‘B-‘ corporate credit rating on CreditWatch with positive implications and assigned a CCC+ rating to the proposed new notes.
Highlight: “We believe the pending refinancing, if successful, would improve NES Rentals’ liquidity position and debt maturity profile. We expect to raise the corporate credit rating by one notch to ‘B’ and affirm the ‘CCC+’ issue-level rating on the new $250 million second-lien notes following the completed refinancing,” said Standard & Poor’s credit analyst Helena Song.
Company: Noranda Aluminum Holding Corp.
Sponsor: Apollo Management
Action: S&P raised the company’s corporate credit rating to ‘B’ from ‘D.’
Highlight: “The upgrade reflects the company’s improved capital structure, as a result of more than $400 million of debt repurchases in 2009, and the improvement in aluminum prices over the past several quarters as a result of the combination of some strengthening in end-market demand and reduced global capacity,” said Standard & Poor’s credit analyst Sherwin Brandford.