Weekly Downgrade Wrap-Up (Including The Tip of The Debt Exchange Iceberg)
As usual, we have a week’s worth of ratings actions on the debt of buyout-backed companies from Standard & Poor’s and Moody’s Investor Services. These lists have lately become a more of a "limited default" roundup, as such LD and "selective default" ratings actions have dominated them. For the uninitiated, this happens when a company either negotiates for an amendment or covenant relief on its debt, or undergoes a distressed debt exchange. Moody's and S&P both view such moves as tantamount to default, since the debt in its original terms will not be repaid. If a company's lenders are nice, the business emerges from these situations with an improved rating on its facilities. If not, the company will likely file for bankruptcy or take a capital infusion from its sponsor. Unfortunately this is just the beginning, as the "rush to deleverage" the boomtime debt hangover will continue well into 2014. Even last year distressed debt exchanges reached almost $30 billion, up from $15 billion in the previous 24 years combined, according to Reuters.
