Moody's downgrades Kinetek

Moody's Investors Service said it changed the probability-of-default rating for Kinetek Holdings Corp. to Caa1/LD from Caa1, affirmed the Caa1 corporate family rating and downgraded the company's senior secured revolving credit facility and senior secured term loan rating to Ca (LGD4, 50%) from B3 (LGD3, 34%) and its senior secured second-lien term loan rating to C (LGD5, 74%) from Caa2 (LGD5, 82%).

The outlook remains negative.

The downgrade follows the company's repurchase of a portion of its outstanding term loans at a significant discount to the original principal amount. Moody's said it considers this repurchase, prior repurchases in 2009 and potential ongoing repurchases of Kinetek's outstanding loan obligations as distressed exchanges due to the significant monetary loss incurred by lenders relative to the principal value of the term loans.

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