An aggressive acquisition strategy and a weakened economic environment have left Neenah Foundry Company highly leveraged at 7.5 times without the cash flow necessary to service the debt, according to Moody's Investors Service. After violating covenants under its bank debt agreements and missing a $15.8 million interest payment on its senior subordinated debt due in May, the company is in negotiations with creditors to restructure its balance sheet and reduce debt. Neenah's lenders have granted the company a forbearance agreement for the violations until May 31. The credit facility includes a $28.5 million revolver and a $1.6 million term loan "A" due in September, a $112.7 million "B" piece due in Sept. 2005, and a $7.2 million acquisition loan due in June 2005. All the facilities were downgraded from Caa1 to Caa3 by Moody's, except the revolver, which is unrated. J.P. Morgan leads the company's bank debt.
Neenah is proposing to refinance the company's credit facility with a new senior secured credit facility and senior second-lien notes. For its noteholders, the company is offering to exchange $282 million of 111/2% guaranteed senior subordinated notes for 100% of the common stock of its parent company, ACP Holdings Company, plus cash or a portion of senior subordinated notes. If an agreement is not reached, Neenah will most likely file for Chapter 11. If the company files for bankruptcy, the secured lenders will probably end up substantially unimpaired, explained Lisa Matalon, Moody's v.p. and senior analyst. Gary LaChey, corporate v.p. of finance for Neenah, did not return calls.
* Central Parking Corp. is already in covenant violation of its two-month old $350 million credit and is working to secure a waiver of those violations. Due to weakened operating performance and credit protection measures, Standard & Poor's has placed the debt ratings of Central Parking on CreditWatch with negative implications, which includes the BB+ rating on its credit facility. S&P cites the company's declining lease-adjusted EBITDA margins and interest coverage as areas of concern. S&P expected these measures to improve but the struggling economy and severe winter weather have impacted the credit. Bank of America leads the line. Bob Votteler, v.p. and treasurer, did not return calls.
|Other Ratings Actions*|
|Smithfield Foods||BB+||Downgraded from BBB-||S&P|
|SpectraSite Communications||B1||Upgraded from B3||Moody's|
|*Thurs, May 8 through Wed, May 14|