Moody's cuts Aramark note to junk

Moody's Investors Service said it downgraded the 5% senior notes due 2012 of Aramark Services, Inc. to B2 from Baa3, confirmed the Baa3 ratings on the senior notes due 2007 and 2008 and assigned a corporate family rating of Ba3 to Aramark Corp., Aramark Services' holding company parent. The B2 rating on the 5% senior notes due 2012 and the Ba3 corporate family rating are under review for possible downgrade.

Moody's placed all the credit ratings of Aramark on review for possible downgrade on May 1 following the announcement that Aramark received a proposal from the company's chief executive officer and a group of investors to acquire all of the outstanding shares of common stock. In August, Aramark announced that it had signed a definitive merger agreement under which the company's chairman and CEO and a group of investment funds will acquire the company in a transaction valued at $8.3 billion, including the assumption or repayment of approximately $2 billion of debt.

Aramark recently disclosed the expected financing package for the acquisition. The agency said the ratings reflect the substantial increase in debt levels and weakening of credit metrics expected in the post-acquisition capital structure, including a likely pro forma debt to EBITDA ratio of more than 6x. Moody's understands that the company does not intend to refinance its 5% senior notes due 2012. The downgrade the notes reflects the expected structural subordination of those notes to high levels of secured and guaranteed debt in the post-acquisition capital structure.

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