Rating Actions & Outlooks
October 29, 2009
Moody's Cuts Revere's PDR To D
Moody's lowered the corporate family rating of Revere Industries LLC to C from Caa2 and the probability of default rating to D from Caa2 as a result of the company's failure to meet interest payment obligations on its first and second lien term loans earlier this year.
Subsequent to these actions, Moody's will withdraw the ratings as a result of Revere's reorganization.
During August of 2009, Revere entered into a series of agreements that resulted in the acquisition of the company by second lien lenders, the release from the original obligations related to second lien indebtedness, an amended and restated first lien credit agreement and a meaningful reduction in the amount of total debt outstanding. The obligations in Revere's new capital structure are not currently rated by Moody's.
The rating outlook was changed to stable from negative.
Revere is a leading manufacturer of plastic and metal custom-engineered components for major industrial customers across a variety of industries.
Moody's Revises Scientific Games Outlook To Negative
Moody's revised Scientific Games Corp.'s rating outlook to negative from stable following the company's announcement that Scientific Games International -- a wholly-owned subsidiary of SGC -- plans to issue $125 million of senior subordinated notes.
The new notes will be an add-on to SGI's existing $225 million 9.25% senior subordinated notes due 2019. The new notes will be guaranteed by SGC and its wholly-owned domestic subsidiaries.
Proceeds from the new note offering are expected to be used for a potential up-front payment towards the award of the new Italian instant ticket lottery concession, should the contract be awarded to the company's bidding group.
"Higher debt levels resulting from the new bond issuance coupled with lower than expected earnings so far in 2009 could make it difficult for SGC to improve credit metrics quickly enough to maintain its current rating," said Moody's.
Moody's expects pro forma for the new notes, net debt to Ebitda will increase above 4x and Ebit to interest coverage will drop modestly below 2x.
SGC is a provider of services, systems, and products to lottery industry, the wide area gaming industry and the pari-mutuel wagering industry.
Moody's Says YRC Exchange Offer Likely To Be A Distressed Exchange
Moody's said that YRC Worldwide Inc.'s plan to commence an exchange offer for its USF notes and its contingent convertible notes, as announced, is likely to be viewed as a distressed exchange.
This is because the consideration YRC is likely to offer in exchange will be well below the face value of the Notes.
YRC's ratings were assigned by evaluating factors the rating agency believes are relevant to the credit profile of the issuer, such as the business risk and competitive position of the company versus others within its industry and the capital structure and financial risk of the company.
YRC Worldwide Inc. is a less-than-truckload trucking company headquartered in Overland Park, Kansas.
Moody's Cuts Suncor's Ratings To Baa2
Moody's lowered Suncor Energy Inc.'s senior unsecured rating to Baa2 from Baa1.
The rated debt of Petro-Canada Ltd. has been assumed by Suncor on a pari passu basis with Suncor's existing senior unsecured debt, and is also rated Baa2. The rating outlook is stable.
The lowering of Suncor's senior unsecured rating to Baa2 reflects the high debt level of the combined company, significant anticipated capital expenditure and development of oil sands assets, and the operational and execution risks of integrating Petro-Canada's predominately conventional assets, of a type and in geographies in which Suncor is inexperienced.
Suncor plans to sell some of the combined reserve assets over the next two years. Given the merged company's elevated financial leverage, the stable outlook is dependent on a clear trend in debt reduction using asset sales proceeds within a reasonable time frame.
In addition, Moody's notes that continued operational success and production increases from the oil sands, which has been subject to delays and setbacks in the past, will also be important in assessing Suncor's earnings and leverage risk in the near to medium-term.
The stable outlook assumes that the proceeds of anticipated asset sales are used to reduce the company's high debt position.
Suncor Energy, headquartered in Calgary, Alberta, is engaged in mining and in-situ oil sands development and production, conventional production of oil and gas, and in downstream refinery and retail operations.
Moody's Changes Nestle's Outlook To Negative
Moody's affirmed the long-term ratings Nestle S.A. but changed its outlook on the company’s ratings to negative from stable.
This action follows Nestle's announcement on Oct. 22 that it will accelerate its share buybacks and the completion of its 25 billion Swiss franc share buyback program.
"The negative outlook reflects the currently weak positioning of Nestle in its rating category combined with the continuation of a shareholder-friendly financial policy and, in particular, the recent announcement that share buybacks will be accelerated in 2009," says Moody's.
In 2008, Nestle's significant share buybacks were offset by the receipt of proceeds from its sale of 25% of Alcon.
However, Moody's said it is concerned that Nestle's announced share buybacks of will significantly exceed free cash flow generation and result in a weakening in credit metrics for 2009 to below the targets set by Moody's for the rating category.
Based in Vevey, Switzerland, Nestle is the largest manufacturer and marketer of packaged food in the world. The company had revenues of 110 billion Swiss francs in 2008.
Moody's Affirms Symbion's B2 CFR, Outlook Remains Negative
Moody's affirmed the ratings of Symbion Inc., but its outlook on the company’s ratings remains negative.
While Moody's acknowledges improvements in case volume growth and the company's ability to maintain positive free cash flow, after considering the benefit of the election of the PIK option on the company's senior notes, the rating agency says it remains concerned about the potential impact on margin performance should the recent slowing of pricing growth continue.
Additionally, the negative ratings outlook anticipates restrictions on the company's ability to access its revolver due to covenant limitations and a reduction in headroom as covenant levels become more restrictive at Dec. 31 and again at Dec. 31, 2010.
Symbion, headquartered in Nashville, Tenn., owns and operates a network of short-stay surgical facilities providing non-emergency surgical procedures in various specialties, including orthopedics, pain management, gastroenterology and ophthalmology.
Moody's Downgrades Gibson, Warns of Further Downgrade
Moody's downgraded Gibson Guitar Corp.'s corporate family rating to B3 from B2 largely due to Moody's expectation of weaker than expected 2009 operating performance versus 2008.
The ratings are on review for possible further downgrade.
The one notch downgrade in the corporate family rating to B3 from B2 reflects the company's expected diminishing operating performance in 2009 versus 2008 and Moody's view that operating performance will likely continue to be pressured for the near term. The downgrade also reflects Moody's concern over Gibson's continuing delay in issuing its 2008 audited financial statements and the risks associated with the company's corporate governance structure.
"The review for downgrade reflects Moody's concern over Gibson's liquidity position as the company no longer has access to its revolving credit facility because of the delay in issuing its financial statements by the waiver deadline" said Moody's.
The review for downgrade also reflects Moody's concern about the company's ability to comply with financial covenants over the next few quarters as the covenants contractually adjust.
Moody's review will focus on the company's liquidity position, including the cushion for covenant compliance and operating cash flow.
Headquartered in Nashville, Tenn., Gibson manufactures and markets acoustic and electric guitars under the Gibson and Epiphone brand names. Revenues for the twelve months ended June 28, 2009 were approximately $300 million.
Moody's Reviews Ares For Downgrade, Allied For Upgrade
Moody's placed Ares Capital Corp.'s Ba1 issuer rating on review for possible downgrade while it placed Allied Capital Corp.’s issuer and senior unsecured ratings on review for possible upgrade.
These rating actions follow Ares' announcement that it has agreed to acquire 100% of Allied in an all stock transaction. The transaction is expected to close in the first quarter of 2010. As a result, Ares will inherit Allied's significant short-term maturities and troubled investment portfolio, putting pressure on its credit profile. On the positive side, Ares will substantially increase its scale and is acquiring Allied at a substantial discount to GAAP book value.
Allied's ratings were placed under review for upgrade as its creditors should benefit from being part of Ares, a higher rated firm that has performed substantially better than Allied through the credit cycle.
Ares Capital is based in New York and reported total assets of $2 billion as of June 30. Allied Capital Corporation is based in Washington, D.C., and reported total assets of $3.2 billion as of June 30.
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