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

As usual, we have a week’s worth of ratings actions on the debt of LBO-backed companies. This week we finally say goodbye to Chrysler once and for all, as the company emerges from bankruptcy and Cerberus officially loses its investment. Meanwhile, auto parts maker Dana Corp., backed by Centerbridge Capital, was downgraded and, in a curious twist, Harrah’s was upgraded. Despite the excitement around Harrahs’ successful debt offering, I’m not rushing to remove it from the “Top Ten Worst Deals of 2008” list yet.

Company: Dana Holding Corporation
Sponsor: Centerbridge Capital Partners LP
Downgrade: Moody’s lowered the company’s corporate family rating to Caa2 and its probability of default rating to Caa1.
Highlights: “On May 8, 2009, Dana commenced a tender offer for a portion of its outstanding senior secured term loan at a deep discount to par value. The company’s PDR and the rating on the term loan were adjusted to Ca at that time to reflect the potential for loss to investors. With the passage of time since the May 12 target date for concluding the tender, Moody’s has now repositioned the PDR at Caa1.”

Company: Sagittarius Restaurants
Sponsor: Charlesbank Capital Partners
Downgrade: Moody’s lowered the company’s corporate family rating to Caa2 from Caa1 and its probability of default rating to Caa2 from Caa1.
Highlights: “Although the operating profit improved in the first quarter 2009 largely due to lower commodity costs that more than offset the declined revenue, Moody’s expects the current operating environment will likely remain challenging for both its Del Taco and Captain D’s concepts.”

Company: Chrysler LLC
Sponsor: Cerberus Capital Management
Downgrade: Standard & Poor’s Ratings Services today said it has withdrawn its ratings on Chrysler LLC, including the ‘D’ corporate credit rating.
Highlights: “The rating withdrawal follows the sale of substantially all of the company’s assets to a new entity, Chrysler Group LLC.”

Company: Builders FirstSource Inc
Sponsor: JLL Partners Inc., Warburg Pincus LLC
Downgrade: S&P lowered its corporate credit rating on the company to ‘CCC+’ from ‘B-‘.
Highlights: “Builders FirstSource Inc.’s operating performance will likely remain weak during the next several quarters given our expectation for continuing difficult operating conditions due to the ongoing slump in new residential construction.”

Company: John Maneely Company
Sponsor: Carlyle Group
Downgrade: Moody’s lowered the company’s corporate family rating to B2 from B1. The rating for JMC’s term loan was lowered to B3 from B2 and the rating for the company’s and co-borrower 6582125 Canada Inc.’s asset-based revolving credit facility was lowered to Ba2 from Ba1.
Highlights: “The downgrade and ongoing review recognize the challenges JMC is facing as demand for welded mechanical steel pipe has fallen appreciably with the slowdown of North American non-residential construction activity.”

Company: Harrah’s Entertainment
Sponsor: Apollo Management and TPG
Upgrade: S&P raised its corporate credit rating rating on Harrah’s Entertainment and Harrah’s Operating Co. to to ‘CCC+’ from ‘CCC’. S&P also raised the issue-level rating on HOC’s senior secured credit facilities to ‘B’ (two notches higher than the ‘CCC+’ corporate credit rating) from ‘B-‘.
Highlights: “While a highly leveraged financial profile, combined with our expectation that EBITDA will decline in the mid-teens percentage area in 2009 and be roughly flat in 2010, will likely result in credit measures remaining weak over the intermediate term, we believe that ratings upside potential exists if performance on the Las Vegas Strip and Atlantic City stabilizes in 2010 and longer-term prospects improve.”

Previous Weeks:
Weekly Downgrade Report 16
Weekly Downgrade Report 15
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