Wackenhut Buyout Raises Leverage; Oglebay Liquidity A Concern

Standard & Poor's has placed the BB senior secured debt ratings of Wackenhut Corrections Corp. on negative watch following the announcement of plans to repurchase Danish security firm Group 4 Falck's 57% stake in the security services company for $132 million in cash. S&P states concern over the company's plans to restructure its existing credit and issue additional debt in order to finance the transaction. Moody's Investors Service also placed the Boca Raton, Fla.-based company's Ba3 credit facility rating on review for downgrade. The Moody's review reflects Wackenhut's substantial increase in leverage in order to finance the stock repurchase.

BNP Paribas and Wachovia Securities lead Wackenhut's existing deal with a $125 million "B" loan and a $50 million revolver. Reportedly, $150 million more new debt will be issued in relation to the Group 4 Falck repurchase. John O'Rourke, cfo and treasurer of Wackenhut, was out of the country and could not be reached last week.

* S&P also lowered Oglebay Norton's corporate credit rating to B- from B due to its continued weakness in the mineral supplier's end markets and concerns regarding deteriorating liquidity. S&P adds that the rating could fall further if the company's actions do not enhance Oglebay's tight liquidity. Oglebay received a waiver on March 31 after failing to comply with several restrictive covenants on its credit facilities. The waiver expires June 15.

Moody's also downgraded Oglebay's $265 million credit from B2 to B3 on account of its weakening profitability. The decline in financial performance in all of its businesses and risk associated with asbestos and silica litigation is also a source of concern. But to Oglebay's credit, Moody's notes the company's strong market share in three industry segments and its focus on cost management and operating efficiency. S&P notes the Cleveland-based company has about $427 million in debt outstanding. Key Bank, Scotia Capital and Bank One are agents on Oglebay's bank facility. Julie Boland, cfo and treasurer of Oglebay, did not return calls.