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Weekly Downgrade Wrap-Up

As usual, we have a week’s worth of ratings agency downgrades, upgrades, revisions and withdrawals on the debt of LBO-backed companies, via Standard & Poor’s and Moody’s Investor Services. Not too much action this week, after several weeks packed with amendments and exchange offers. Maybe that’s because the ratings on all the really distressed debt have been withdrawn.

Company: Wilton Products
Sponsor: GTCR Golder Rauner
Withdrawal: Moody’s confirmed the company’s B3 corporate family and probability of default ratings and withdrew its rating because it lacks adequate information to rate the company.
Highlights: The rating reflects “the risk inherent in the company’s highly leveraged capital structure which includes significant junior capital with limited rights ($195 million of mezzanine and $224 million of preferred equity).

Company: Panolam Industries
Sponsor: Genstar Capital LLC and Sterling Group
Withdrawal: Moody’s downgraded the company’s probability of default rating to “Ca/LD” from “Ca.”
Highlights: “The rating action reflects Panolam’s failure to make the interest payment on the 10 ¾% senior subordinated notes within the 30 day grace period following the April 1, 2009 interest payment date. “

Company: American Axle
Sponsor: Blackstone Group LP
Downgrade: Moody’s lowered the company’s probability of default rating to Caa3 from Caa1, and its Corporate Family Rating to Ca from Caa1.
Highlights: “The lowering of American Axle’s Probability of Default Rating to Caa3 considers the impact of the extended summer shutdowns announced by GM and Chrysler, which represented approximately 74% and 10% of total sales, respectively in 2008.”

Company: Evenflo
Sponsor: Weston Presidio
Downgrade: Moody’s downgraded the company’s corporate family rating to Caa1 from B3.
Highlights: “The downgrade reflects the company’s weak December 2008 quarter given the retail environment and our expectation that business conditions will remain challenging over the medium-term.”

Company: Oriental Trading Company
Sponsor: Carlyle Group
Withdrawal: S&P lowered the company’s corporate credit rating to ‘CCC’ from ‘CCC+’.
Highlights: The company obtained a waiver and an amendment to its credit facility but S&P believes that ongoing weak operating performance creates a narrow cushion and puts pressure on the company’s liquidity position.

Company: Arrowhead General Insurance Agency
Sponsor: Spectrum Equity Investors and JMI Equity
Action: S&P removed the company from “Creditwatch negative” following its filing of 2008 financial results and an amendment to its credit agreements. The company still has a negative outlook and ‘B-‘ counterparty credit rating.
Highlights: “We could revise the outlook to stable over the next 12 months if management were to be successful in performing in line with existing bank loan covenants, secure a new CFO, and provide evidence of more stable operating performance and improved liquidity.”

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