S&P cuts K&F Industries, rates loan B+, notes B-

Standard & Poor's said it lowered its ratings on K&F Industries Inc., including the corporate credit rating to B+ from BB-, and removed the ratings from CreditWatch. The outlook is stable.

At the same time, S&P assigned its B+ bank loan rating and a recovery rating of 3 to the company's proposed $480 million senior secured credit facilities. The BBB- rating on the existing credit facility is withdrawn.

S&P also assigned its B- rating to K&F's proposed $365 million senior subordinated notes due 2014.

S&P said the downgrade reflects heightened financial risk from the proposed acquisition of K&F by Aurora Capital Group. Pro forma for the transaction, debt will double to about $800 million and most credit protection measures will weaken significantly, with debt to adjusted EBITDA at 6.5x, debt to capital at 72%, and adjusted EBITDA to cash interest at 2.3x.

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