S&P: Coinmach on negative watch

Standard & Poor's said it placed its BB- corporate credit and senior secured bank loan ratings, as well as its B senior unsecured debt rating, on Coinmach Corp. on CreditWatch with negative implications.

The CreditWatch placement comes after Coinmach's parent company, Coinmach Service Corp., filed a registration statement with the Securities and Exchange Commission for an initial public offering of income deposit securities representing shares of Coinmach Service's common stock and subordinated debt. In connection with this offering, Coinmach is expected to redeem a portion of its outstanding subordinated notes due 2010 and some of its existing secured bank loan.

S&P said it believes that the IDS structure exhibits an aggressive financial policy and significantly reduces a company's financial flexibility, given the anticipated high dividend payout rate.

S&P noted it is already concerned about Coinmach's weak financial performance, which stems from a combination of high vacancy rates in the firm's key markets and higher costs related mainly to insurance and health care.

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