Weekly Downgrade Wrap-Up

As usual, we have a week’s worth of ratings actions on the debt of LBO-backed companies from ratings agencies Standard & Poor’s Ratings Services and Moody’s Investor Services. As has been the trend toward the end of summer, the number of downgrades has significantly fallen off.

I noted last week that even the number of private equity-backed companies on S&P’s “Weakest Links” list seems to have dwindled. The list represents companies that are most likely to default, and part of the reason it’s shrunk may be because many of the companies have already defaulted. Is this the bottom of the default cycle?

Company: Network Communications Inc.
Sponsor: Citigroup Private Equity
Downgrade: S&P lowered the bank loan issue-level ratings on Network Communications to ‘CCC+’ from ‘B-‘.
Highlights: “The recovery rating revision reflects a change to our estimated default EBITDA and emergence valuation under our simulated default scenario,” said Standard & Poor’s credit analyst Jeanne Mathewson.

Company: Talecris Biotherapeutics, Inc.
Sponsors: Cerberus Capital Management and Ampersand Ventures
Upgrade: Moody’s upgraded the ratings of Talecris Biotherapeutics, Inc. Corporate Family Rating to ‘B2′ from ‘B3′.
Highlights: Diana Lee, a Senior Credit Officer at Moody’s said, “If Talecris is able to achieve and sustain lower debt levels and comfortable covenant cushions, further rating improvement is possible.”

Company: Capmark Financial Group Inc.
Sponsors: KKR and Goldman Sachs
Downgrade: S&P lowered its ratings on Capmark Financial Group Inc., including lowering the local-currency, long-term corporate credit rating on the company to ‘CC’ from ‘B-‘.
Highlights: The downgrade follows Capmark’s announcement that it lost $1.6 billion in second-quarter 2009 and that it has entered into an asset-put agreement that gives it the right to sell its North American servicing and mortgage-banking businesses. “We expect Capmark either to enter Chapter 11 bankruptcy proceedings or to negotiate a distressed exchange outside of bankruptcy, which most likely would affect most of its debt. “We will consider either of these events to be a default,” said Standard & Poor’s credit analyst Jeffrey Zaun.

Previous Weeks:
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