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.

PRESS RELEASE

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.

Complete ratings information is available to RatingsDirect subscribers at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor’s public Web site at www.standardandpoors.com; select your preferred country or region, then Ratings in the left navigation bar, followed by Find a Rating.