Moody's boosts Aeroflex loans

Moody's Investors Service said that in connection with the closing of Aeroflex Inc.'s leveraged buyout on August 15, 2007 the capital structure of the transaction was altered from what was previously advised to the agency.

The agency said that the senior secured first lien revolver was downsized to $50 million from $60 million' the senior secured first lien term loan was upsized by $25 million, for a total term loan amount of $525 million and transformed into two tranches consisting of a $400 million "first-out" tranche and $125 million "first-loss" tranche; the company canceled the $370 million senior subordinated notes and instead entered into a $225 million unrated senior unsecured bridge loan and a $120 million senior subordinated PIK loan facility; while the preferred equity contribution of $372 million from the private equity sponsors remains unchanged.

In light of the aforementioned capital structure changes, Moody's said it has affirmed Aeroflex's B3 corporate family rating, withdrawn the rating on the senior secured first lien term loan, upgraded the rating on the senior secured first lien revolver to Ba3 from B1 and assigned a Ba3 rating to the first-out senior secured term loan.

The one-notch upgrade of the revolver and Ba3 rating assigned to the first-out term loan tranche of the credit facility reflect the lower loss-given-default point estimate (21% from 27%), the senior position of this debt tranche in Aeroflex's capital structure and the new "first-out" feature which mandates that interest and principal on the revolver and term loan be paid in full prior to the "first-loss" senior secured term loan in a default scenario, Moody's said, noting that it also assigned a B3 rating to the $125 million "first-loss" tranche of the credit facility.

The agency said that the following ratings were upgraded: $50 million senior secured first-lien revolver due 2013 to Ba3 (LGD-2, 21%) from B1 (LGD-2, 27%).

Moody's said that the following ratings/assessments were assigned: $400 million (first-out) senior secured term loan due 2014 at Ba3 (LGD-2, 21%), $125 million (first-loss) senior secured term loan due 2014 at B3 (LGD-4, 56%) and $120 million senior Subordinated PIK loan Facility due 2015 at Caa2 (LGD-6, 94%).

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