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Weekly Downgrade Wrap-Up: Where Does Portfolio Company Debt Stand?

As usual, we have a week’s worth of ratings actions on buyout-backed companies from ratings agencies Standard & Poor’s and Moody’s Investor Services. This week there were two appearances by downgrade regular Apollo Management, and two from GS Capital Partners. Bruckmann Rosser Sherrill’s Lazy Days RV saw its ratings withdrawn for unspecified reasons (although such a move usually occurs at the company’s request). Lastly, remember that Six Flags, which filed for Chapter 11 bankruptcy protection, is minority owned by Generation Partners. So there’s that.

Company: USI Holding Corp
Sponsor: GS Capital Partners
Downgrade: S&P has assigned a ‘B-‘ rating to the company’s proposed $117 million senior secured term loan and downgraded its existing senior secured credit one notch to ‘B-‘.
Highlights: “Our expectations for 2009 incorporated into the current rating level are that the company will have positive cash flow and will be able to meet its restrictive covenants in the near to medium term.”

Company: Six Flags Inc.
Sponsor: Generation Partners
Downgrade: S&P lowered the company’s corporate credit rating to ‘D’ on its bankruptcy filing. Moody’s downgraded the company’s probability of default rating to D.
Highlights: Generation Partners owns a minority stake in the company. “The plan of reorganization would reduce debt by roughly $1.8 billion and eliminate the company’s preferred stock.”

Company: Hawker Beechcraft Acquisition Company
Sponsor: GS Capital Partners
Upgrade: Moody’s affirmed ratings on the company’s senior secured bank facilities (‘B3’), and subordinated notes (‘Ca’), and upgraded its senior unsecured cash-pay and PIK-election notes to ‘Caa3’ from ‘Ca.’
Highlights: “The ratings reflect the expected loss on the instruments from the waterfall of liabilities deployed in the Loss Given Default model and incorporate a Caa2 CFR and PDR along with an assumed 50% family recovery

Company: Momentive Performance Materials Inc.
Sponsor: Generation Partners
Downgrade: Moody’s downgraded the company’s probability of default rating to Ca/LD from Caa3 as the ratings agency deemed the recently concluded the notes exchange offer which included issuance of secured second lien notes to be a distressed exchange. The ratings on Momentive’s senior unsecured notes and senior subordinated notes were changed to Ca from Caa2 and Caa3, respectively, reflecting the low applicable clearing price resulting from the exchange offer.
Highlights: “Despite the negative outlook, Momentive has relatively good liquidity with over $381 million of cash on its balance sheet, but only $30 million of availability under its $300 million revolving credit facility.”

Company: Sabre Holdings
Sponsor: Trident Capital and Silver Lake Sumeru
Downgrade: S&P lowered the company’s corporate credit rating to ‘SD’ (selective default) from ‘B’ and the issue-level rating on the company’s senior notes due 2011 to ‘D’ from ‘CCC+’.
Highlights: “The rating actions reflect the company’s open market purchases of $76 million of its senior notes due 2011 at a cost of $44 million in April 2009. The debt repurchase met our criteria for a distressed debt redemption.”

Company: Lazy Days’ R.V. Center, Inc.
Sponsor: Bruckmann Rosser Sherrill & Co
Withdrawal: Moody’s withdrew its ratings on the company’s debt. The ratings agency did not provide a reason for the withdrawal.
Highlights: The last rating action on Lazy Days was on April 27, 2009, when Moody’s confirmed the company’s Ca corporate family rating and changed its probability of default rating to Ca/LD.

Company: Jacuzzi Brands Corp.
Sponsor: Apollo Management LP
Downgrade: S&P lowered its ratings on the company’s corporate credit rating to ‘CCC’ from ‘CCC+’. S&P also lowered the ratings on the company’s $170 million first-lien term loan, $15 million synthetic letter–of-credit facility, and $150 million second-lien term loan to ‘CC’ from ‘CCC-.’
Highlights: “The ‘CCC’ rating on Jacuzzi reflects its tightening liquidity position, very competitive industry conditions, overall industry cyclicality, the relatively narrow focus of the company’s principal product lines, weak operating margins, and very aggressive financial leverage.”

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