Standard & Poor's has downgraded the senior secured bank loan rating of CSK Auto Corp. from BB- to B+ due to tweaks the company has made to its credit facility in conjunction with a larger recapitalization. The company has amended and restated its senior credit facility, increasing the borrowings by $75 million to $400 million. The new credit agreement does not include the asset coverage ratio, which limited the advances under CSK Auto's revolver, S&P notes. Calls to Don Watson, CSK Auto's cfo, were not returned.
The proceeds from the increased borrowings under the credit and from CSK Auto's issue of new BB- rated $200 million senior subordinated notes issue will be used to repay the company's $280 million senior unsecured notes, which CSK Auto is in the process of tendering. S&P expects the recapitalization to reduce the company's interest expense and enhance financial flexibility. The retail provider of auto parts and accessories has been able to achieve better operating results over the last two years.
* Moody's Investors Service has changed the outlook issued to GenCorp's debt from stable to negative, reflecting the expectation that operating results from the company's GDX Automotive segment will continue to deteriorate. GDX represents about two-thirds of GenCorp's sales. In the last few years the segment's thin margins and cash flow contributions have hurt GenCorp's credit fundamentals, notes Moody's. The company's $303 million senior secured facilities are rated Ba2.
GenCorp is currently pursuing a B3-rated $100 million convertible subordinated note offering, which is earmarked to reduce the outstanding amount on the company's credit facility by $54 million. About $30 million will be directed to repay the outstanding amount on the company's $137 million revolver and approximately $24 million will go toward the company's "A" term loan.
Upon the completion of the note offering, the company's leverage increases from about 3.8 times to 4.2 times adjusted EBITDA. The company's interest coverage decreases from 2.3 times to 2 times as a result of the transaction. Calls to Yasmin Seyal, senior v.p. and cfo, were referred a spokeswoman who did not return calls.