S&P cuts UC Holdings to B-, rates notes CCC

Standard & Poor's said it lowered its long-term corporate credit rating on UC Holdings Inc. to B- from B.

The outlook is stable.

The agency also lowered its issue rating on the $325 million senior secured notes, for which Chassix Inc. is the borrower, to B- from B. The recovery rating on these notes remains unchanged at 4, indicating an expectation of average (30%-50%) recovery in the event of a payment default.

In addition, S&P assigned its CCC issue rating to the proposed $125 million payment-in-kind toggle notes due 2018 to be issued by Chassix Holdings. The recovery rating on these notes is 6, indicating an expectation of negligible (0%-10%) recovery in the event of a payment default.

S&P said the downgrade of UC follows the company's announcement related to Chassix Holdings' issuance of $125 million PIK toggle notes to fund a dividend payout to its private equity owners, Platinum Equity Advisors LLC and UC's management.

Following this announcement, the agency views UC's financial policy as "very aggressive" and continues to view its financial risk profile as "highly leveraged."

"We anticipate that the group's debt to EBITDA (including our adjustments, mainly for operating leases) will exceed 5.5x as of Dec. 31, 2013, and remain higher than 5.0x in 2014, with negative free operating cash flow (FOCF) likely to persist at least over the next 12 months," S&P credit analyst Nishit Madlani said in a news release.

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