Moody's drops Synagro to Caa1

Moody's Investors Service said it downgraded Synagro Technologies, Inc.'s corporate family and probability-of-default ratings to Caa1 from B3 and first-lien senior secured rating to B2 (LGD3, 32%) from B1 (LGD3, 30%). The Caa2 (LGD5, 83% from 81%) second-lien senior secured rating was affirmed.

The outlook is negative.

Moody's said the downgrades reflect its belief that Synagro could have difficulty maintaining compliance with the leverage covenant of the first-lien senior secured credit facility, without resorting to the agreement's cure provision, in 2009.

The Caa1 corporate family rating reflects concerns that credit metrics are not likely to meaningfully improve over the intermediate term because of the weak economy and the level of investment in construction projects that would be required to meet Synagro's growth targets that were anticipated at the time of the acquisition by the Carlyle Group, according to the agency.

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