Moody’s cuts DFC Finance, Sterling

Moody's Investors Service said it downgraded the senior secured rating of DFC Finance Corp. to Ca from Caa1 and the corporate family rating of Sterling Mid-Holdings Ltd., the parent company of DFC Finance Corp., to Caa3 from Caa1.

The outlook is stable.

Moody’s said the downgrade of DFC Finance’s senior secured ratings follows the company's June 27 tender offer where it seeks to exchange its $800 million 10˝% senior secured notes into new 12% payment-in-kind (PIK) notes. While the new notes will have the same maturity and seniority as the existing notes, the exchange of cash interest-bearing obligations into PIK notes indicates constrained liquidity at the company as well as default avoidance.

Therefore, Moody's views this transaction as a distressed exchange and default under its definitions.

The downgrade of Sterling’s corporate family rating reflects its weak financial performance, as evidenced by continuing losses, high leverage and the resulting weak debt servicing metrics, as well as constrained liquidity. In the nine months ended March 31, the company reported a $137 million pre-tax loss after posting a $311 million loss in its fiscal year ended June 30, 2015.

In addition, Sterling's EBITDA is negative according to the agency’s calculations, which do not add back restructuring and other charges, most of which have been recurring.

As of March 31, Sterling had $1 billion of debt, the majority of which was represented by the $800 million notes that are being exchanged into the new PIK notes.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.