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  • valuedaset valuedaset Mar 2, 2010 2:18 PM Flag

    S&P Credit Downgrade...

    Has anyone looked into the S&P credit down grade? I was reviewing the press release it appears that they put FRZ on neg. credit watch and lowered the rating 4 levels from B to CC. That is a huge drop! S&P ratings from B, down you have B-, CCC+, CCC-, CC.
    I dont recall if FRZ was "B" before the downgrade. Just wondering if the press release is correct? Any thoughts?

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    • valuedasset, i was talking to iwont because he said 270mm will be at 13.25%...but the 270mm will be at 11.25%.

    • The refinancing will leave the capital structure with at least $30 million more in debt (270 + 150 = $420 million, compared to the prior $390 million) and this estimate doesn't even take into account an undrawn revolver. The company has conceded higher cash interest payments and an increase leverage in return for more liquidity and a push-back on the maturity date of its debt. Common stock is at the bottom of the pile and more debt is never good news.

      • 1 Reply to casey8858
      • I think Reddy Ice is an interesting long idea longer-term.

        That said, Reddy Ice's refinancing is very expensive and a find the timing questionable. They said that they did it to address debt maturities, remove certain covenants in their credit facility, to raise cash to make accretive acquistions etc. etc. That may be the right long-term strategy . . .

        That said, pro forma for their announced refinancing their cash interest will increase $35 mm per year from ~$15 mm to about ~$50 mm.

        I think the stock has considerable downside risk in the short to medium term as folks begin to pro forma future earnings for the increased interest costs.

        I think most of the positive news is priced into the stock re the likely settlement with the government and the increased interest expenses have not been factored in by most investors.

        I DO NOT expect to see a settlement with the government imminently -- if it was coming in the near-term surely Reddy Ice would have waited to do their HY deal.

    • Buy any BS downgrades. FRZ is a $12 stock.