Fitch Affirms GenCorp IDR; Places Subordinated Debt on Watch.
NEW YORK New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- On June 8, 2006, GenCorp Inc. (GY) announced plans to increase its senior secured credit facilities credit facilities npl → facilidades fpl de crédito
credit facilities npl → facilités fpl de paiement
credit facilities to $234.5 million from $178.5 million. GY is also seeking an amendment to the Indenture governing its 9.5% senior subordinated notes due 2013 to permit GY to incur the additional indebtedness.
Based on the proposed transaction, Fitch affirms the following ratings:
-- Issuer Default Rating (IDR IDR
In currencies, this is the abbreviation for the Indonesian Rupiah.
The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) at 'B-';
-- Senior Secured Debt affirmed at 'BB-'/ Recovery Rating (RR) 'RR1';
-- Senior Subordinated Notes affirmed at 'BB-/RR1'.
In addition, Fitch is placing the following issues on Rating Watch:
-- 5.75% Subordinated Convertible Notes due 2007 on Rating Watch Positive -- with the expectation of raising the ratings to 'BB-/RR1' from 'B-/RR4' should the transaction close as proposed.
-- 4% Contingent Convertible Subordinated Notes and 2.25% Contingent Convertible Subordinated Debentures, both due 2024 on Rating Watch Negative -- with expectation of lowering the ratings to 'CCC+/RR5' from 'B-/RR4'.
The Outlook remains Stable. Approximately $624 million in debt is affected by these actions.
GY is obligated ob·li·gate
tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates
1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force.
2. To cause to be grateful or indebted; oblige. per its senior credit agreement to cash collateralize collateralize
To pledge an asset as security for a loan. A loan to a broker is collateralized by pledging securities. the 5.75% notes by January 2007 if they have not been redeemed by then. The ratings of these notes will benefit from GY's stated intention to immediately cash collateralize these notes upon funding. Fitch expects GY to use the cash collateral to retire these notes when they mature in April 2007. The ratings of the remaining subordinated debt Subordinated Debt
A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". , however, will be lowered due to the lower likelihood of recovery as senior secured debt increases.
GY plans to replace its $98.5 million senior secured credit-linked facility that is part of its senior credit agreement with a new $154.5 million senior secured credit-linked facility. The new facility is expected to consist of an $80 million letter of credit sub-facility (an increase of $35.7 million), with a $20 million optional but uncommitted accordion accordion, musical instrument consisting of a rectangular bellows expanded and contracted between the hands. Buttons or keys operated by the player open valves, allowing air to enter or to escape. The air sets in motion free reeds, frequently made of metal. feature, and a $74.5 million term loan (an increase of $20.3 million). The $80 million senior secured revolving credit Revolving Credit
A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility under the senior credit agreement is to remain unchanged.
GY is taking these actions in order to enhance liquidity and to comply with the terms of its senior credit agreement. Presently, the company has approximately $18 million to $25 million of letters of credit (LC) outstanding related to environmental obligations issued under the $80 million revolver. Increasing the LC sub-facility will allow the company to utilize the LC facility instead, increasing availability under the revolver.
The recovery ratings and notching of the debt tranches reflect Fitch's recovery expectations under a scenario in which distressed enterprise value is allocated to the various debt classes. The analysis was based on a liquidation analysis due to the significant real estate holdings and utilized conservative real estate values based on unentitled land values. Should the land become entitled or GY receive a significant cash infusion from a buyer of (or partner for) some of these holdings and utilize these monies to retire debt, Fitch would anticipate raising the ratings. It should be noted that GenCorp issued a request for proposals to developers earlier this year, but results have yet to be announced To be announced (TBA)
A contract for the purchase or sale of an MBS to be delivered at an agreed-upon future date but does not include a specified pool number and number of pools or precise amount to be delivered. .
Exclusive of the planned cash collateralization In medicine, collateralization, also vessel collaterlization and blood vessel collateralization, is the growth of a blood vessel or several blood vessels that serve the same end organ or vascular bed as another blood vessel that cannot adequately supply that end organ of the 5.75% subordinated convertible notes ('RR1' expected due to cash collateral), the recovery ratings benefit from the value of GY's lands with the senior secured credit facility and the senior subordinated debt expected to see 100% recovery ('RR1').
Due to the expected increase in the size of the senior secured facility, the uncollateralized convertible subordinated notes and contingent convertible subordinated notes are now expected to see recovery in the 11% to 30% range ('RR5'), whereas they had previously been expected to see recovery in the 31% to 50% range.
Fitch's Recovery Ratings (RR), introduced in 2005, are a relative indicator of creditor recovery on a given obligation in the event of a default. A broad overview of Fitch's RR methodology as it relates to specific sectors, including a Case Study webcast, can be found at www.fitchratings.com/recovery.
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