Moody's upgrades Tensar

Moody's Investors Service said it changed the probability-of-default rating of TCO Funding Corp. to Caa3/LD following a conversion of about $55 million of unrated holding company paid-in-kind notes to equity.

The agency raised the corporate family rating to Caa2 from Caa3, the first-lien term loan to B2 (LGD2, 22%) from B3 (LGD2, 18%) and assigned a B2 to its revolver to reflect the revised capital structure. Moody's said it will raise the probability-of-default rating to Caa2 after three days.

The outlook is stable.

The assignment of the LD modifier reflects the view that the exchange of the PIK notes to equity constitutes a distressed exchange.

The completion of Tensar's balance sheet restructuring has resulted in a meaningful reduction in debt, has waived all preexisting specified defaults and establishes financial covenants that are consistent with Tensar's current operating performance with a $27 million senior secured revolver that matures in April 2012, according to the agency.

The upgrade of the corporate family rating reflects the reduction in debt levels following the balance sheet restructuring and the extension of time for Tensar to establish a long term capital structure, Moody's said.

The Caa2 rating incorporates Tensar's high post restructuring leverage and meaningful refinancing risk over the next 12 to 18 months, the agency said.

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