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Weekly Downgrade Wrap-Up (Two Bankruptcies, One Technical Upgrade, and a Chrysler)

As usual, we have a week’s worth of ratings actions from ratings agencies Standard & Poor’s and Moody’s. We excluded the ratings changes on the week’s two bankruptcies, which were Odyssey Investment Partners’ Dayton Superior Corp. and Bruckman Rosser Sherrill’s Eurofresh.

Company: Banc of America Capital Investors
Sponsor: Cumulus Media Inc.
Downgrade: Moody’s downgraded the company’s corporate family rating to Caa1 from B3 and its probability of default rating to Caa1 from B3.
Highlights: “The downgrade of the PDR to Caa2 incorporates Moody’s view that there is increasing probability that Cumulus will likely default under its tightening financial covenants over the near term, absent an amendment. Moody’s considers that Cumulus’ lenders will agree to loosen the level of the company’s already- elevated financial maintenance tests only in exchange for significantly higher pricing, which in turn will serve to tighten the company’s liquidity profile.”

Company: Euramax International
Sponsor: GS Capital Partners
Downgrade: Moody’s lowered the company’s corporate family rating to Ca from Caa1.
Highlights: “Euramax is also highly levered and tangible assets are less than its debt level. These matters create an environment where Moody’s believes Euramax’s balance sheet will likely be restructured, with investors realizing sizeable losses.”

Company: Financial Guaranty Insurance Co.
Sponsors: Blackstone Group, CIVC Partners and Cypress Advisors
Downgrade: S&P lowered the company’s rating from ‘CCC’ to ‘CC.’ The ratings agency subsequently withdrew its rating on the company because it expects (for no apparent reason) that financial information on the company will longer be available.
Highlights: “‘Recently released GAAP financial statements for both FGIC and FGIC Corp. contain a statement from the independent auditor that there is substantial doubt regarding the company’s ability to continue as a going concern,’ noted Standard & Poor’s credit analyst Robert E. Green.”

Company: Chrysler
Sponsor: Cerberus Capital Management
Downgrade: Chrysler’s corporate family rating has been downgraded to C and its recovery rate lowered to 20% from 50%.
Highlights: The downgrade is based on Moody’s certainly that the company will restructure its debt or file for Chapter 11. “The reduction in the estimated family recovery to 20% reflects the impact that the unprecedented erosion in the North American auto markets is having on Chrysler’s ongoing viability, and on the value of its tangible assets and its various brands. Moody’s believes that the company’s inability to finalize the debt restructuring that was one of the conditions of the government bailout loans extended to the company in December is due, in part, to this erosion in value.”

Company: Yell Group
Sponsor: Apax Partners
Downgrade: Moody’s downgraded the company’s corporate family rating to B1 from B3 and its probability of default rating to B2 from B1
Highlights: “To avoid (covenant) pressure, Yell would need to undertake further cost-cutting measures beyond the GBP100 million (around 5% of revenues) announced in November 2008. Nevertheless, considering that the company has already undertaken sizeable cost reductions (i.e. GBP250 million), Moody’s believes further cost-cutting measures would be harder without undermining the group’s business strategies.”

Company: Harrah’s
Sponsor: TPG and Apollo Management
Downgrade: S&P raised its rating on Harrah’s to ‘CCC’ from ‘SD’
Highlights: “The ratings upgrade follows the conclusion of our review of the company’s new capital structure following the recent settlement of its second below-par debt tender offer, which we viewed as being tantamount to default given the distressed financial condition of the company.”

Company: Hanley Wood
Sponsor: Wasserstein, J.P. Morgan Partners, AlpInvest Partners and CCMP Capital Advisors
Downgrade: S&P lowered the company’s ratings to ‘B-‘ from ‘B’.
Highlights: “The rating downgrade reflects our concern that the soft U.S. housing market, weak advertising demand, and general economic conditions will continue to pressure performance in 2009, causing Hanley Wood’s borrowing availability under its revolving credit facility to become strained by rising debt leverage and impending financial covenant step-downs.”

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