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Weekly Downgrade Wrap-Up

As usual, we have a week’s worth of ratings agency actions on the debt of LBO-backed companies from Moody’s Investors Services and Standard & Poor’s. This week, we’ve got a rating on the new Harrah’s debt (higher than expected), and downgrades on companies owned by Apollo, Apax, Canaan Partners, Centerbridge Capital Partners, Silver Hawk, Silver Lake, Kohlberg & Co., Madison Dearborn Partners LLC and Providence Equity Partners.

Company: Harrah’s Entertainment Inc.
Sponsor: TPG and Apollo Management
Downgrade: S&P placed the company’s ‘CCC’ corporate credit rating on CreditWatch with positive implications. S&P also assigned the proposed $1.0 billion senior secured notes offering an issue-level rating of ‘B’ (two notches higher than the expected ‘CCC+’ post-transaction corporate credit rating on Harrah’s).”
Highlights: “We view the bank amendment as being a positive step since we were previously concerned that, given our expectation for operating performance, HOC may not have been able to remain in compliance with its senior secured leverage ratio covenant in the coming quarters.”

Company: Claire’s Stores
Sponsor: Apollo Management
Downgrade: S&P affirmed the company’s corporate credit rating but ratings on its revolving credit facility and secured loans were lowered from ‘B-‘ from ‘B’.
Highlights: “The revision of the recovery rating follows diminished prospects of recovery for the company due to our expectation that the recent poor performance is likely to continue over at least the near term.”

Company: RAM Reinsurance Co. and RAM Holdings
Sponsor: Canaan Partners
Downgrade: S&P lowered the counterparty credit, financial strength, and financial enhancement ratings on RAM Reinsurance Co. Ltd. to ‘BBB-‘ from ‘A+’. The agency lowered the senior unsecured debt and preference stock ratings on holding company RAM Holdings Ltd. to ‘BB-‘ and ‘C’, respectively, from ‘BBB’ and ‘BB+’.
Highlights: “In our opinion, the company’s decision to cease being an SEC-registered company, which means that it no longer will be required to file financial statements regularly, has hurt its financial flexibility. More importantly, RAM Re recently announced that it had suspended dividends on the holding company’s preference shares and will suspend dividends following the June 2009 payment on the operating company’s preference shares.”

Company: Dana Holding Corp.
Sponsor: Centerbridge Capital Partners
Downgrade:S&P lowered its corporate credit rating on Dana to ‘SD’ (selective default) and its rating on the term loan to ‘D’.
Highlights: “Dana announced that it has completed its dutch auction tender offer in which it repurchased less than 10% of this facility at a substantial discount to par (at a price of 40% to 44% of face value), which we view as a distressed debt exchange and tantamount to a default.”

Company: CDW Corp.
Sponsor: Madison Dearborn Partners LLC and Providence Equity Partners
Downgrade: S&P lowered the company’s corporate credit rating to ‘B-‘ from ‘B’.
Highlights: “The deteriorating operating performance is partly offset by CDW’s consistently profitable history, diversified customer base, and good position in the highly fragmented value-added reseller market for technology products and services.”

Company: IPC Systems, Inc.
Sponsor: Silver Lake
Downgrade: Moody’s downgraded the company’s corporate family rating to B3 from B2 and its probability and its probability of default rating to Caa1 from B2.
from B3.
Highlights: “The company’s liquidity position continues to be adequate over the near term with proceeds remaining from the Command Systems sale in November 2008 and additional availability under the company’s revolver (which is subject to covenant limitations).”

Company: Stanadyne Holdings
Sponsor: Kohlberg & Co.
Downgrade: Moody’s lowered the company’s corporate family rating to Caa1 from B3.
Highlights: “The downgrade of CFR to Caa1 reflects Moody’s expectation that Stanadyne’s operating performance will deteriorate substantially during 2009 as a result of weakening demand for its diesel fuel injection products from all its end markets, and could pressure the company’s ability to generate sufficient cash flow relative to its debt structure.”

Company: Elyria Foundry Company
Sponsor: Silverhawk Capital Partners
Downgrade: Moody’s downgraded the company’s corporate family rating ratings to Caa1 from B2.
Highlights: “While the company has taken significant steps to restructure its operations, we believe that Elyria’s small size and limited liquidity position may constrain its ability to adapt to changing market conditions.”

Company: Central European Media Enterprises
Sponsor: Apax Partners
Downgrade: S&P lowered to ‘B+’ from ‘BB-‘ the long-term corporate credit rating.
Highlights: “In our view, CME’s liquidity profile is likely to remain supportive for the current rating level following the recent capital injection from Time Warner, and despite the expected deterioration of the group’s operating performance associated with high leverage in 2009.”

Previous Weeks:

Weekly Downgrade Report 14
Weekly Downgrade Report 13
Weekly Downgrade Report 12
Weekly Downgrade Report 11
Weekly Downgrade Report 10
Weekly Downgrade Report 9
Weekly Downgrade Report 8
Weekly Downgrade Report 7
Weekly Downgrade Report 6
Weekly Downgrade Report 5
Weekly Downgrade Report 4
Weekly Downgrade Report 3
Weekly Downgrade Report 2
Weekly Downgrade Report 1