Moody's downgrades K&N

Moody's Investors Service said it downgraded K&N Parent, Inc.'s probability of default rating to Caa3-PD/LD from Caa2-PD following the limited default due to an extension of its grace period for missed debt payments. The agency also trimmed K&N's corporate family rating to Caa3 from Caa2, senior secured first-lien credit facilities to Caa3 from Caa1 and second-lien term loan to Ca from Caa3. Lastly, Moody’s changed the outlook to negative from stable.

K&N skipped the required principal and interest payments on its senior secured credit facilities for the quarter ending September but obtained extensions to the original grace period to Oct. 31.

“Moody's views the extensions of the grace periods for missed debt payments to be a limited default,” the agency said in a press release.

K&N also secured a priority first-lien bridge facility to provide liquidity during the extended grace period. The bridge facility primes the existing first- and second-lien debt holders, leaving those creditors structurally subordinated.

“Moody's believes K&N's untenable capital structure and weak liquidity with upcoming debt maturities will result in a debt restructuring with potential losses to existing creditors,” the agency said.

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