As usual, we have a week’s worth of ratings actions on the debt of LBO-backed companies from S&P and Moody’s Investors Service. This week was a busy one for downgrades and debt exchanges, with eight downgrades and one upgrade.
Company: Energy Future Holdings Corp.
Sponsor: Kohlberg Kravis Roberts & Co.
Action: S&P raised its corporate credit rating on EFH and its unregulated subsidiaries TCEH and EFCH to ‘B-‘ from ‘SD’ and assigned a ‘B–’ corporate credit rating to EFIH. This rating action follows EFH’s recent announcement that it and its subsidiaries have completed the exchange of its $357 million of various securities within the entire capital structure.
Highlight: “These ratings reflect EFH’s consolidated creditworthiness post-exchange.” The outlook on these corporate credit ratings is negative, reflecting weak financials and increasing refinance risk.
Company: Bankruptcy Management Solutions, Inc.’s
Sponsor: Ocwen Financial Corp. and Charlesbank Capital Partners
Action: Moody’s downgraded the company’s corporate family rating
to Caa2 from B3
Highlight: “The ratings downgrade reflects near-term maturity of its $367 million investment line of credit (unrated), which is collateralized by its portfolio of auction-rate securities. Due to the deterioration in the liquidity of the auction rate securities market, BMS has been unable to sell these securities.”
Company: Integra Telecom, Inc.
Sponsor: Warburg Pincus, Boston Ventures and Banc of America Capital Investors.
Action: Moody’s upgraded the company’s corporate family
rating to B2 from Caa1 and probability of default rating to B2 from Ca following the completion of its previously announced debt restructuring program.
Highlight: “The upgrades reflect the Company’s stronger credit profile following the restructuring, as the company eliminated roughly one half of its debt and management can now devote its full attention to the prospective restoration of the Company’s growth potential.”
Company: United Site Services
Sponsor: DLJ Merchant Banking Partners
Action: Moody’s lowered the company’s probability-of-default rating to Ca/LD from Caa3.
Highlight: This action follows the company’s recent announcement that it plans to restructure its debt obligations as well as its decision not to make the interest payment on the mezzanine loan (unrated) within the grace period.
Company: Momentive Performance Materials Inc.
Sponsor: Apollo Management
Action: S&P raised its ratings on Momentive by two notches, including the corporate credit rating, which went to ‘CCC+’ from ‘CCC-‘.
Highlight: “The ratings reflect Momentive’s very high debt leverage and fair business risk profile. … Beginning in the fourth quarter of 2008, the company’s operating performance deteriorated sharply in tandem with recessionary conditions and a big drop-off in customer orders across most businesses and geographies.”
Company: Simmons Company
Sponsor: THL Partners (The company will be sold to Ares Management LLC and a unit of the Ontario teacher’s Pension Plan as part of the reorganization.)
Action: Moody’s Investors Service downgraded the company’s probability of default rating to D from Ca/LD following Monday’s announcement that it had filed for bankruptcy protection.
Highlight: “Neither the $465 million senior secured term loan nor the $75 million revolver is impaired under the plan that was submitted.”
Company: Ply Gem Industries
Sponsor: CI Capital Partners
Action: S&P lowered its issue-level rating on the company’s senior subordinated notes due 2012 to ‘D’ from ‘CC’.
Highlight: “The rating action follows the company’s recent announcement that CI Capital Partners LLC, acquired an additional $46.7 million of the 9% senior subordinated notes due 2012. … ‘CCC’ rating reflects the company’s highly leveraged financial profile given our expectations that interest coverage is likely to remain below 1x over the next several quarters.”
Company: Cannery Casino Resorts
Sponsor: Oaktree Capital Management
Action: Moody’s downgraded the company’s corporate family and probability of default ratings to Caa1 from B2. Moody’s also lowered the company’s senior secured revolver and term loans to B3 from B1, and its second lien term loan to Caa3 from Caa1.
Highlight: The downgrade reflects the slower than expected ramp up at Cannery’s two new casino facilities — the permanent facility at The Meadows which opened in April 2009 and Eastside Cannery in North Las Vegas which opened in August 2008. As a result, leverage will be significantly higher than expected.
Company: Wesco Aircraft Hardware Corp.
Sponsor: Carlyle Group
Action: Moody’s upgraded the company’s corporate family rating to B1, probability of default rating to B1.
Highlight: “Wesco’s B1 Corporate Family Rating is supported by the continued strong operating margins and bottom line profitability and the expectation of positive free cash flow generation. The rating is further supported by the company’s good liquidity profile with no near term maturities.”