S&P Downgrades Bankruptcy Management Solutions

Standard & Poor’s has cut the corporate rating of Bankruptcy Management Solutions Inc. from B- to CCC+, and also downgraded part of the company’s debt. BMS is an Irvine, Calif.-based provider of hardware and support services to bankruptcy trustees and certain other fiduciaries. It was acquired in 2006 by Charlesbank Capital Partners.



Bankruptcy Management Solutions Inc. Downgraded To ‘CCC+’ On – Leverage, Profitability Concerns NEW YORK, Feb. 20, 2009–Standard & Poor’s Rating Services said to-day it lowered its ratings on Irvine, Calif.-based Bankruptcy Management Solutions Inc. (BMS), including the corporate credit rating, which we lowered to ‘CCC+’ from ‘B-‘. The outlook is negative.


At the same time we lowered the issue rating on the company’s first-lien bank credit facilities, consisting of a $15 million revolving credit facility due in 2011 and a $220 million first-lien term loan due in 2012, to ‘CCC+’ from ‘B’. We also revised the recovery rating on that debt to ‘4’ from ‘2’. The ‘4’ recovery rating indicates expectations for average (30%-50%) recovery in the event of a payment default.


In addition, we lowered the issue ratings on the company’s $125 million second-lien notes and $150 million of floating-rate senior paid-in-kind (PIK} notes issued by parent company BMS Holdings Inc. to ‘CCC-‘ from ‘CCC’. The recovery ratings on these issues remains at ‘6’, indicating expectations for ‘negligible’ (0%-10%) recovery in the event of a payment default. (For the complete recovery analysis, see the recovery report on BMS, to be published later to-day on RatingsDirect.)


“The downgrade reflects our concerns regarding BMS’ highly leveraged financial profile, the impact of declining trustee deposit balances and a volatile interest rate environment on the company’s revenue and EBITDA prospects, significant refinancing risk, and modest free cash flow generation,” said Standard & Poor’s credit analyst Susan Madison. Debt outstanding at Sept. 30, 2008 (including investment line borrowings and $150 million of floating-rate senior paid-in-kind [PIK] notes issued by parent company BMS Holdings Inc.) totaled about $905 million.


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