As usual, we have a week’s worth of ratings actions on the debt of PE-backed companies from ratings agencies Moody’s and Standard & Poor’s. This week was pretty boring (Perhaps Moody’s was too busy preparing its Mega-buyout report?).
There were just three ratings actions, one of which is a withdrawal on an already-bankrupt company. That company is Accuride, a company which Sun Capital took a stake in through its Sun Capital Securities hedge fund earlier this year. The company underwent a debt-for-equity swap as Sun Capital Securities transitioned out of its debt investment strategy to actively managed equity investments.
Company: Rafaella Apparel
Sponsor: Cerberus Capital Management LP
Downgrade: Moody’s downgraded the company’s corporate family and probability of default ratings to Caa3 from Caa1, and the rating on its 11.25% second lien notes to Ca from Caa2.
Highlights: “Rafaella’s liquidity is weak given its significant longer term debt maturities. However, balance sheet cash along with the expectation for modest free cash flow and revolver availability appear sufficient to cover cash needs over the next year.”
Company: Arrowhead General Insurance Agency Inc.
Sponsor: Spectrum Equity Investors, JMI Equity
Downgrade: S&P assigned its ‘B-‘ counterparty credit rating and negative outlook to the company and ‘B-‘ ratings to the company’s first-lien facilities and a ‘CCC’ rating to its second-lien debt.
Highlights: “The ratings on Arrowhead reflect its strained cash flow and diluted capital quality following the leveraged majority investment in Arrowhead by California-based Spectrum Equity Investors in 2006,” said Standard & Poor’s credit analyst Jieqiu Fan.
Company: Sun Capital Partners
Sponsor: Accuride Corp.
Downgrade: S&P withdrew its ratings on the company.
Highlights: The corporate credit rating and subordinated debt rating the company were lowered to ‘D’ (default) on Aug. 6, 2009, after the company missed making an interest payment on its subordinated notes. The senior secured debt ratings were lowered to ‘D’ on Oct. 8, 2009, after the company filed for Chapter 11 bankruptcy protection.