As usual, we have a week’s worth of ratings actions on the debt of LBO-backed companies from ratings agencies Standard & Poor’s Investors Ratings Services and Moody’s Investor Service. This week we’ve got two bankruptcies and even more distressed debt exchanges.
Company: NCI Building Systems
Sponsor: Clayton, Dubilier & Rice
Action: S&P raised its corporate credit rating on Houston-based metal building components manufacturer NCI Building Systems Inc. to ‘B+’ from ‘SD’ (selective default) and affirmed its ‘B+’ issue-level rating on the company’s $150 million senior secured term loan.
Highlight: “The upgrade follows the conclusion of our review of the company’s new capital structure upon completion of its recapitalization,” said Standard & Poor’s credit analyst Thomas Nadramia.
Company: NTK Holdings (Nortek)
Sponsor: Thomas H. Lee Partners
Action: Moody’s lowered the company’ probability of default to D from C following NTK Holdings’ parent’s announcement, Inc. that it and its domestic subsidiaries filed for bankruptcy.
Highlight: Moody’s will withdraw all of Nortek’s ratings shortly
Company: Airborne Health
Sponsor: Summit Partners
Action: S&P withdrew its ‘D’ corporate credit rating on the company.
Highlight: On Oct. 12, 2009, the company was sold to a new entity formed by GF Capital PE Fund. S&P withdrew the ratings at the request of the company.
Company: Harrah’s Operating Co. Inc.
Sponsor: Apollo Management LP and TPG Inc.
Action: S&P lowered its issue-level rating on Harrah’s Operating Co. Inc.’s $9.25 billion senior secured credit facilities and $2.095 billion senior secured notes, and removed the ratings from CreditWatch with negative implications, where they were placed on Sept. 22, 2009. The corporate credit rating on Harrah’s Entertainment Inc. (HET) is ‘CCC+’ and the rating outlook is developing.
Highlight: “The rating reflects the company’s weak credit metrics and limited liquidity. In addition, it reflects our expectation for continued negative trends in net revenues and EBITDA over the next few quarters, which could challenge Harrah’s ability to service its debt obligations given extremely thin EBITDA coverage of interest.”
Company: Stallion Oilfield Services Ltd.
Sponsor: Carlyle Group
Action: Moody’s Investors Service has withdrawn the company’s ratings following its filing for Chapter 11.
Highlight: The last rating action was on September 14, 2009 when Moody’s downgraded Stallion’s CFR to Ca from Caa3, PDR to D from Caa3 and the senior secured debt ratings to B3 from B2.
Company: Advanstar Communications, Inc.
Sponsor: Veronis Suhler Stevenson, New York Life Capital Partners, Citigroup Private Equity, Anchorage Capital Partners
Action: Moody’s Investors Service changed the company’s probability of default rating to Caa2/LD from Caa3 following the closing of a debt for
equity transaction which Moody’s views as a distressed exchange.
Highlight: The upgrade in the Corporate Family Rating to Caa2 reflects an improved capital structure after elimination of $385 million in second lien, mezzanine and subordinated debt. Yet despite the significant reduction in debt, Advanstar remains highly levered at current earnings levels and Moody’s does not expect financial leverage (debt to EBITDA) to fall below 10 times in 2010.