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Published on 9/4/2009 in the Prospect News Bank Loan Daily and Prospect News Distressed Debt Daily.

S&P keeps Allen Systems on watch

Standard & Poor's said its CCC+ rating on Allen Systems Group Inc. will remain on CreditWatch with developing implications until the company's proposed $355 million first- and second-lien financing deal is completed.

As currently proposed, the first-lien portion consists of a $20 million, three-year revolving credit facility and a $235 million, four-year term-loan. The second-lien portion consists of a $100 million, four-and-a-half-year term-loan B.

The agency believes a new financing would be a positive development for Allen Systems because the company will use the proceeds to refinance the existing $340 million senior secured credit facility and thereby resolve its technical default.

S&P said it will likely assign a BB- rating with a recovery rating of 1 to the first-lien tranche and a B+ rating with a recovery rating of 2 to the second-lien tranche. And given the tightness of the proposed covenants and the still-soft IT environment, the agency said it expects the outlook to be negative.


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