Wednesday, November 4, 2015

Carlyle's Getty to Enter "Limited Default"

WSJ reported:

A group of Getty Images Inc. bondholders struck a deal with the Carlyle Group CG +0.64% portfolio company to exchange some of the securities they hold for new senior debt while lending it $100 million of new money, according to Bloomberg News.
Moody's story is quite different:

Moody's Investors Service downgraded Getty Images, Inc.'s ("Getty") Corporate Family Rating one notch to Caa1 from B3 and the Probability of Default Rating to Caa1-PD from B3-PD reflecting Moody's view that the company will need more time than previously expected to improve credit metrics, including leverage and free cash flow. Moody's also downgraded the company's senior secured credit facilities to B3 and the senior unsecured notes to Caa3. In addition, the company announced plans to issue $252.5 million of new 10.5% senior secured notes in exchange for $100 million of cash plus roughly $240 million of existing 7% senior unsecured notes representing a 36% discount to face value. Moody's views this transaction as a distressed exchange and will assign a "Limited Default" or "LD" to the company upon closing. The LD designation will be removed in three days. The rating outlook is changed to stable from negative. 
Carlyle crammed down existing debt holders, will enter limited default for a mere three days and got a rating outlook upgrade for a company in a stressed market?