Moody's cuts Longyear to B2, rates loans B2, Caa1

Moody's Investors Service said it downgraded its corporate family rating for Longyear Holdings, Inc. to B2 from B1 and assigned B2 and Caa1 ratings, respectively, to its first-lien and second-lien credit facilities.

More specifically, Moody's assigned a B2 rating to the $75 million senior secured first-lien revolving credit facility maturing July 28, 2010 and the $500 million senior secured first-lien term loan maturing July 28, 2012. Moody's said it assigned a Caa1 rating to the $75 million senior secured second-lien term loan maturing Jan. 28, 2013.

Moody's said it maintained the stable outlook.

The ratings are in response to Longyear's announced plan to use cash and proceeds from an incremental $150 million of bank debt to pay a $210 million shareholder dividend.

The proposed transaction represents a transformation of the company's financial strategy from that indicated to Moody's when the company was initially rated in June. The higher leverage shows a willingness to impose a highly risky financial structure on Longyear, which already has a relatively high degree of operating risk, Moody's said.

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