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Weekly Downgrades: How Is Portfolio Company Debt Performing?

As usual, we have a week’s worth of ratings actions on the debt of LBO-backed companies from Standard & Poor’s and Moody’s Investor Services. This week saw downgrades on yet another distressed debt exchange (Duane Reade) and a post-debt exchange upgrade. Rounding it out were a handful of bankruptcy-related withdrawals.

Company: Duane Reade Inc.
Sponsor: Oak Hill Capital Management
Downgrade: S&P lowered its corporate credit rating on the company to ‘CC’ from ‘CCC+’ and lowered the subordinated debt rating to ‘CC’ from ‘CCC-‘. Moody’s downgraded the company’s probability of default rating to Ca from Caa2.
Highlight: The downgrade follows Oak Hill’s announcement to launch a distressed debt exchange for the company. “We view this offer as being tantamount to default given that Duane Reade’s highly leveraged capital structure that we believe may be unsustainable over the intermediate term, and the company’s weak financial profile.”

Company: CCS Medical, Inc.
Sponsor: Warburg Pincus
Downgrade: Moody’s downgraded the company’s probability-of-default rating to D from Caa1 and the corporate family rating to Ca from Caa1.
Highlight: The downgrade was prompted by CCS’s recent announcement that it elected to file petitions for relief under Chapter 11 of the United States Bankruptcy Code.

Company: Indalex Holding Corp.
Sponsor: Sun Capital Partners Inc
Withdrawal: S&Pwithdrew its ratings on bankrupt Indalex Holding Corp., including its ‘D’ corporate credit rating, because of a lack of adequate information to continue surveillance.

Company: Accellent Inc.
Sponsor: Kohlberg Kravis Roberts & Co., Bain Capital and DLJ Merchant Banking Partners
Upgrade: Moody’s upgraded the company’s corporate family rating and probability of default rating to B3 from Caa1.
Highlight: “(The ratings) reflect improved operating performance and a better liquidity profile including positive free cash flow generation as well as increased headroom under covenant cushions.”

Company: Allis-Chalmers Energy Inc.
Sponsor: Lime Rock Partners
Upgrade: Moody’s changed its Probability of Default Rating to B3 from B3/LD, and upgraded its $225 million 9% senior notes due 2014 to Caa1 (LGD 4, 62%) from Caa3 (LGD 3, 35%) and its $205 million 8.5% senior notes due 2017 to Caa1 (LGD 4, 62%) from Ca (LGD 4, 40%).
Highlight: “The rating actions reflect the company’s capital structure after the completion of its cash tender offer on its $255 million 9% senior notes due 2014 and $250 million 8.5% senior notes due 2017.”

Company: United Subcontractors
Sponsor: Wind Point Partners
Downgrade: S&P withdrew its ratings on the company, including its ‘D’ corporate credit rating, at the request of the company.
Highlight: United Subcontractors emerged from bankruptcy.

Company: Advanstar Inc.
Sponsor: Veronis Suhler Stevenson
Downgrade: S&P lowered the corporate credit rating to ‘CCC’ from ‘B-‘.
Highlight: “The rating actions reflect Advanstar’s weak operating performance, thin interest coverage, and modest liquidity,” said Standard & Poor’s credit analyst Tulip Lim.

Company: Motorsport Aftermarket Group
Sponsor: Leonard Green & Partners
Downgrade: Moody’s downgraded the company’s corporate family rating from to Caa2 from Caa1.
Highlight: The downgrade reflects the company’s weakening operating performance and eroding liquidity. Its revenues continued to decline in the recent past, primarily driven by the decreasing demand for its motorcycle parts and accessories as the prolonged recession continued to take tolls on consumer disposable income and discretionary spending for leisure related products.

Previous Weeks:

Weekly Downgrade Report 19
Weekly Downgrade Report 18
Weekly Downgrade Report 17
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