-- U.S. systems management and cloud computing software
provider Allen Systems Group Inc. has missed an interest payment
on its senior secured second-lien notes, which was due on Nov.
-- We are therefore lowering our corporate credit rating on
the company to 'D' from 'CCC-' and lowering the issue-level
ratings on the company's debt.
On Nov. 19., 2012, Standard & Poor's Ratings Services
lowered its corporate credit ratings on Allen Systems Group Inc.
to 'D' from 'CCC-'. We also lowered our issue-level rating on
its first-lien senior secured loan to 'CC' from 'CCC+'. The
recovery rating on its first-lien senior secured loan remains at
'1', indicating our expectation for a very high (90% to 100%)
recovery in the event of payment default. In addition, we
lowered our issue-level rating on the senior secured second-lien
notes to 'D' from 'CC'. The recovery rating on these notes is
unchanged at '5', reflecting our expectation for modest recovery
(10% to 30%) in the event of a payment default.
The rating action follows the missed interest payment on the
company's 10.5% senior secured second-lien notes due 2016, which
was due on Nov. 15, 2012. A payment default has not occurred
relative to the legal provisions of the notes, which allow for a
30-day grace period.
Under our criteria, however, we consider the extension of a
due payment of interest or principal as tantamount to a default
if the payment falls later than five business days (which was
Nov. 15, 2012, for Allen Systems) after the scheduled due date.
Although the company has entered into a commitment letter
with TPG Opportunity Partners that contemplates the full
refinancing of the existing first-lien facility, as well as the
payment of the missed second-lien interest at or before
consummation of the financing, we don't believe that the
second-lien interest payment will occur within five business
days after the scheduled due date, due to the uncertain timing
of closing of the financing.
In addition, the company hasn't been in compliance with its
total leverage, fixed-charge coverage, and minimum liquidity
covenants since June 30, 2012. During October 2012, the company
entered into a forbearance agreement with the required lenders
under the credit agreement. However, the forbearance agreement
expired on Nov. 7, 2012.
Related Criteria And Research
-- Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC'
Ratings, Oct. 1, 2012
-- Business Risk/Financial Risk Matrix Expanded, Sept. 18,
-- Liquidity Descriptors For Global Corporate Issuers, Sept.
-- Use Of CreditWatch And Outlooks, Sept. 14, 2009
-- Criteria Guidelines For Recovery Ratings, Aug. 10, 2009
-- 2008 Corporate Criteria: Analytical Methodology, April
-- 2008 Corporate Criteria: Rating Each Issue, April 15,
-- 2008 Corporate Criteria: Ratios And Adjustments, April
Downgraded; Recovery Rating Unchanged
Allen Systems Group Inc.
Corporate Credit Rating D/-- CCC-/Watch Dev/--
US$25 mil revolving bank ln due CC CCC+/Watch Dev
Recovery Rating 1 1
US$195 mil. term bank ln due CC CCC+/Watch Dev
Recovery Rating 1 1
US$300 mil. 10.50% sr secd 2nd lien D CC/Watch Dev
nts due 2016
Recovery Rating 5 5