Weekly Downgrade Wrap-Up

As usual, we have a week’s worth of ratings agency actions on the debt of buyout-backed companies from Standard & Poor’s Ratings Service and Moody’s Investors Service. This week was slow—two upgrades and one default leading to one withdrawal.

One upgrade, interestingly, is on a very recent deal. Last month, KKR purchased $300 million in the senior secured notes of Eastman Kodak. The deal sent Kodak’s stock price down and raised questions as to what KKR’s plan for the stagnant company would be as a debt investor. But the deal at least elicited an upgrade from Moody’s. The ratings agency upgraded Eastman Kodak’s speculative grade liquidity rating to SGL-1 from SGL-2 upon the closing of the company’s new debt issuance. More details below.

Company: Best Brands Corporation
Sponsor: Brantley Partners
Ratings Action: Moody’s upgraded its corporate family rating and probability of default rating on Best Brands from ‘Caa1’ to ‘Caa3’.
Highlights: “While its latest margin expansion may not be sustainable and the topline decline causes some concern, we expect Best Brands’ run-rate credit metrics to be considerably stronger than their 2008 levels, when the company was in a severe financial distress,” explained Moody’s lead analyst John Zhao. “The focus on managing volatility in its input cost by implementing various hedging programs, should improve its earning stability going forward.”

Company: True Temper Sports
Sponsor: Gilbert Global Equity Partners
Ratings Action: Moody’s lowered the company’s probability of default rating from Ca/LD to D following its actual default. company was downgraded from
Highlights: Moody’s and S&P each withdrew their ratings on the company.

Company: Eastman Kodak
Sponsor: KKR
Ratings Action: Moody’s upgraded Eastman Kodak’s speculative grade liquidity rating to SGL-1 from SGL-2 upon the closing of the company’s new debt issuance.
Highlights: The upgrade in the liquidity rating to SGL-1 from SGL-2 reflects our expectation of increased internal cash sources, an important component and driver of the SGL rating.