TEXT-S&P: Central Parking 'CCC' rating remains on watch positive

Fri Jun 15, 2012 1:50pm EDT

June 15 - Overview	
     -- In February 2012 the two largest U.S. parking garage operators, 	
Standard Parking Corp. (unrated) and Central Parking Corp. (CPC), entered an 	
agreement to merge their operations.	
     -- We expect the proposed merger to close as proposed in September 2012.	
     -- Our 'CCC' corporate credit rating and all CPC-related ratings remain 	
on CreditWatch with positive implications.	
	
Rating Action	
On June 15, 2012, Standard & Poor's Ratings Services said that its 'CCC' 	
corporate credit rating and all other related ratings on Nashville, 	
Tenn.-based Central Parking Corp. remain on CreditWatch, where they were 	
placed with positive implications on March 1, 2012. CreditWatch with positive 	
implications means that we could either raise or affirm our ratings on the 	
basis of our analysis when we resolve the CreditWatch listing, particularly 	
with respect to the company's debt and covenants.	
	
Rationale	
On Feb. 29, 2012, CPC entered into a definitive agreement to merge with 	
Standard Parking Corp. in a transaction totaling $450 million. The boards of 	
directors of both companies approved the transaction, as did CPC's 	
stockholders, who will own 28% of the combined company and receive $27 million 	
in cash in three years. Completion of the transaction is subject to Standard 	
Parking's stockholders' approval as well as customary closing conditions, 	
including antitrust and other regulatory review and consummation of financing. 	
Management indicated that it expects to complete the transaction by Sept. 30, 	
2012.	
	
We had previously believed that CPC would violate its leverage covenant in the 	
fiscal second quarter of 2012 (ending March). While the application of about 	
$15 million in proceeds from an asset sale averted covenant violation in that 	
quarter, EBITDA cushions remain thin; however, we believe the proposed merger 	
will address this risk before a violation occurs.	
	
As of March 31, 2012, CPC had about $216 million in total debt outstanding, 	
approximately $30 million in cash and cash equivalents, and less than 10% 	
covenant cushions. The proposed transaction and recapitalization, in our view, 	
creates a combined company with a pro forma adjusted-leverage ratio (total 	
debt to EBITDA), including lease adjustments, in the low-8x area.	
	
CreditWatch	
The CreditWatch listing reflects our expectation that credit metrics would 	
improve upon completion of the merger transaction. We also believe liquidity 	
will improve as we expect the new credit facility's covenants will be less 	
restrictive. 	
	
We could raise or affirm our ratings following our analysis of the combined 	
entity's business and financial profile, and if the company has sufficient 	
covenant headroom, at the closing of the transaction. Based on our forecast, 	
in the absence of a waiver or an amendment to CPC's current credit agreement, 	
we anticipate a violation of the leverage covenant in the fiscal fourth 	
quarter 2012 (ending September). However, we expect the company to address 	
this risk with the concomitant close of the proposed merger. 	
	
We would withdraw our ratings if CPC's existing debt is repaid, which we 	
currently anticipate.	
	
Related Criteria And Research	
     -- Research Update: Central Parking Corp. 'CCC' Rating Placed On Watch 	
Positive On Announcement Of Merger With Standard Parking, March 6, 2012	
     -- Summary: Central Parking Corp., Dec. 19, 2011	
     -- Use Of CreditWatch And Outlooks, Sept. 14, 2009	
     -- Corporate Ratings Criteria 2008, April 15, 2008	
	
Ratings List	
Ratings Remain On CreditWatch	
Central Parking Corp.	
 Corporate credit rating    CCC/Watch Pos/--   	
 Senior secured	
  First-lien term loan      CCC/Watch Pos      	
    Recovery rating         3                  	
  Synthetic letter 	
  of credit                 CCC/Watch Pos      	
    Recovery rating         3                  	
  Revolving credit          CCC/Watch Pos      	
    Recovery rating         3                  	
  Second-lien term loan     CC/Watch Pos       	
    Recovery rating         6                  	
	
	
Complete ratings information is available to subscribers of RatingsDirect on 	
the Global Credit Portal at www.globalcreditportal.com. All ratings referenced 	
herein can be found on Standard & Poor's public Web site at 	
www.standardandpoors.com. Use the Ratings search box located in the left 	
column.
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