S&P downgrades Cinram

Standard & Poor's said it lowered the long-term corporate credit rating on Cinram International Inc. three notches to CC from CCC+, along with the issue-level rating on the company's senior secured bank facility to CC from CCC+.

The 4 recovery rating on the debt is unchanged, indicating 30% to 50% expected recovery in a default.

The agency also said it placed all of Cinram's ratings on CreditWatch with negative implications.

These rating actions follow news of Cinram's proposed refinancing and recapitalization plan for its credit facilities due May 2011, which is the completion of a distressed exchange offer, S&P said.

Under the plan, lenders are asked to agree to exchange a portion of the existing first-lien secured debt into second-lien debt with a mandatory exchange into equity at Dec. 31, 2011, the agency said.

The ratings are based on a view of the plan's requirement that lenders accept a replacement debt with a weaker security position, S&P said, along with mandatory conversion to equity under certain conditions for a portion of the existing debt.

The agency also said it believes there is a realistic possibility that Cinram could fall into payment default when the existing debt matures in May 2011.

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