Manville, Crusader, Charter, Gottschalks: Bankruptcy

The U.S. Supreme Court held oral argument yesterday on a dispute arising from the long-completed reorganization of Johns Manville Corp. How the justices rule will determine whether the power of bankruptcy judges will be curtailed in blocking lawsuits against third parties not in bankruptcy.

Justice Ruth Bader Ginsburg, who at the outset seemed partial to a more narrow view of the power of bankruptcy courts, referred to the appeal as this “most mysterious case.”

The justices peppered a lawyer for asbestos claimants with more critical questions than those faced by the insurance companies’ counsel.

Justice Stephen G. Breyer said the test on whether there was jurisdiction turned on whether the case “could conceivably” affect the bankrupt company. As a practical matter, Breyer said an insurance company would never agree to fund a Chapter 11 plan without the broad protection against lawsuits afforded by the bankruptcy judge in the Manville case.

Chief Justice John G. Roberts, whose questions suggested he, too, could vote for broader power in the bankruptcy court, asked whether the asbestos claimants’ rights weren’t sufficiently protected by the Due Process Clause of the Constitution without stripping the bankruptcy judge of authority.

Although Manville confirmed a reorganization plan in 1986 that was designed to stop asbestos suits not only against itself but also against insurance companies, several individual and class suits were filed against the insurers in which the plaintiffs argued that their claims were aimed solely at the insurance companies for their misconduct.

While the plaintiffs were having little to no success in state courts, the insurance companies decided to settle and pay still more money for protection from suits.

The bankruptcy judge approved the settlement in 2004, ruling in the process that the new suits were and always had been blocked by the 1986 plan confirmation. An appeal ensued.

The U.S. Court of Appeals in New York reversed in February 2008, saying there was no bankruptcy jurisdiction to bar “independent tort actions” where the “plaintiffs neither seek to recover insurance proceeds nor rely on the insurance policies for recovery.”

The Supreme Court agreed to review the decision at the request of Travelers Property Casualty Corp. (TRV), Manville’s primary insurer.

The appeal will be decided before the Supreme Court adjourns in late June or early July.

The Court of Appeals opinion is Travelers Casualty & Surety Co. v. Chubb Indemnity Insurance Co. (In re Johns Manville Corp.), 06-2099, U.S. Court of Appeals for the Second Circuit.

The appeals to the Supreme Court are Travelers Indemnity v. Bailey, 08-295, and Common Law Settlement Counsel v. Bailey, 08-307, U.S. Supreme Court.

New Filing

Oil and Gas Producer Crusader Energy Files Chapter 11 in Dallas

Crusader Energy Group Inc. (KRU), an oil and gas exploration and production company based in Houston, filed a Chapter 11 petition yesterday in Dallas, listing assets of $750 million against debt totaling $326 million.

Crusader warned earlier this month that it might not be able to make the first of six $833,000 payments to eliminate a $5 million borrowing base deficiency on its senior credit facility.

A borrowing base reduction is at the core of the problems besetting Energy Partners Ltd., another oil and gas producer discussed below under Watch List.

Crusader, which filed for reorganization along with seven affiliates, said its options include a sale of “all or substantially all” of the assets.

To read other Bloomberg coverage, click here.

The case is In re Crusader Energy Group Inc., 09-31797, U.S. Bankruptcy Court, Northern District of Texas (Dallas).

Biodiesel Maker Files in Delaware with Two Plants

Nova Biosource Fuels Inc. (NBFAQ), the owner of two non-operating biodiesel plants, filed a Chapter 11 petition yesterday in Delaware along with nine affiliates, listing $110 million in both assets and debt.

The company blamed the filing on the lack of working capital and adverse conditions in the market for diesel fuel.

The company makes its product from fats, oils and grease. It began in business by making plants for other owners.

The plant in Seneca, Illinois, where the business is based, has a capacity of 60 million gallons a year. The second plant, in Clinton, Iowa, can produce 10 million gallons annually.

Debt includes a $36 million credit agreement for the Seneca plant and $55 million in secured convertible notes. Trade suppliers are owed another $12 million.

The case is In re Nova Holdings Clinton County LLC, 09-11081, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Watch List

Energy Partners Warns of April 3 Default on $38 Million Payment

Energy Partners Ltd., an independent oil and natural gas exploration and production company, says it doesn’t have $38 million needed to pay its lenders by April 3 to head off a default on the $83 million credit.

The obligation to pay down the debt arose when the banks made their semiannual redetermination and lowered the borrowing base to $45 million from $150 million.

The company warned in a regulatory filing yesterday that it could default on the bank debt unless it successfully negotiates a forbearance agreement. The company also said it is talking with an ad hoc committee representing holders of $450 million in senior unsecured notes.

Energy Partners said the senior notes would be in default if the banks require repayment of the entire $83 million.

Standard & Poor’s previously reported that the company is in discussions with the noteholders about a debt-for-equity exchange.

The company previously failed to provide $16.7 million in bonds required by federal energy regulators to cover obligations to clean up after abandoned wells.

The New Orleans-based company has almost $500 million in debt. Its shares closed yesterday at 11.5 cents, down 3.5 cents in over-the-counter trading. The stock set a two-year closing high of $19 on April 16, 2007.

Other Updates

Charter Communications Given Temporary Cash Use

Charter Communications Inc. (CHTR), the fourth-largest cable-TV operator in the U.S., was given temporary approval to use cash at a hearing yesterday dominated by argument among lawyers over whether it’s proper to reinstate $8.2 billion in debt on which JPMorgan Chase Bank NA serves as agent for the secured lenders.

Charter’s lawyer said that replacing the existing debt with new loans would cost an additional $500 million a year and, in the process, wipe out junior creditors.

The bankruptcy judge set a hearing for April 29 to consider approving the disclosure statement explaining Charter’s reorganization plan. To read Bloomberg coverage, click here.

Charter filed under Chapter 11 on March 27 along with the previously negotiated reorganization plan designed to cancel $8 billion in debt, reduce annual interest expense by $830 million and reinstate $11.8 billion in debt obligations. The plan would be funded with $2 billion in new equity, a $1.2 billion refinancing and $276 million generated through the sale of new notes.

Paul G. Allen, who currently has 49 percent of the equity on a fully converted basis, would see his interest reduced to 35 percent to avoid a change in control that would require repricing the JPMorgan debt. Allen is a co-founder of Microsoft Corp. (MSFT)

St. Louis-based Charter has 5.5 million customers in 27 states. The company’s financial statements for Dec. 31 show assets of $13.9 billion and $21.5 billion in long-tem debt.

The proposed plan cancels existing stock and pays trade suppliers in full while giving out new stock, new notes, cash and warrants.

The case is In re Charter Communications Inc., 09-11435, U.S. Bankruptcy Court, Southern District New York (Manhattan).

Gottschalks to Be Liquidated; No Going-Concern Buyer

Gottschalks Inc. was unable to avoid the fate common to most retailers in Chapter 11. After yesterday’s auction, Gottschalks’ Chief Executive Jim Famalette said the company decided “regrettably” to liquidate.

The company announced early this morning that it selected a group of liquidators to sell the inventory in going-out-of-business sales to begin as early as April 2. The bankruptcy court will hold a hearing tomorrow for approval of the liquidation sales and the selection of the liquidators.

It appeared for a time that Gottschalks might survive when Shandong Commercial Group, a Chinese owner of supermarkets and department stores, qualified to bid at the auction. Shandong didn’t participate in the auction, people knowledgeable of the process said.

The winning bid came from a group of liquidators including SB Capital Group LLC, and Tiger Capital Group LLC, Great American Group LLC, and Hudson Capital Partners LLC, the same group that ran going-out-of-business sales for Circuit City Stores Inc.

Gottschalks and its 62 department stores filed under Chapter 11 in January. The first bid at auction came from liquidators guaranteeing a recovery of 85 percent of the cost of the inventory.

Gottschalks’s formal lists of assets and debt shows property for $257 million and liabilities totaling $131 million, including $76 million in secured debt. Along with the Chapter 11 petition, the company listed assets of $288 million against debt totaling $197 million, including $29 million owing to trade suppliers. The petition listed General Electric Capital Corp. as the agent for the secured lenders owed $73 million when the petition was filed.

The case is In re Gottschalks Inc., 09-10157, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Bruno’s Supermarkets Is Setting Up Procedures for May 8 Auction

Although Bruno’s Supermarkets LLC says it hasn’t decided yet whether it will sell anything, the retailer filed papers on March 27 asking the bankruptcy court to approve auction and sale procedures should attractive offers arise.

If the U.S. Bankruptcy Judge in Birmingham, Alabama, goes along with the schedule, a purchaser must have submitted a non-binding proposal yesterday. If an initial offer is acceptable, other potential purchasers would be required to submit their offers three days before an auction that would take place May 8.

Lenders would be able to bid using their secured claims and not cash.

Bruno’s is in the process of asking the bankruptcy judge to terminate existing union contracts. The hearing will begin April 2. The company said the most likely purchasers have indicated they won’t buy unless the existing contracts are ended and the successorship clause is deleted.

Bruno’s is in the process of closing 11 stores.

The Chapter 11 reorganization begun Feb. 5 is the second for Bruno’s, which has had four owners since 1995. The current owner is Lone Star Funds, a Dallas-based investor.

Bruno’s owes $22.5 million to trade suppliers and other unsecured creditors plus $6.8 million to taxing authorities.

The case is In re Bruno’s Supermarkets LLC, 09-00634, U.S. Bankruptcy Court, Northern District Alabama (Birmingham).

$200 Million Bid for Tropicana Atlantic City Casino

The conservator appointed by the state court to operate the Atlantic City, New Jersey, casino owned by Tropicana Entertainment LLC announced yesterday that a group of secured lenders agreed to be the initial bidder at auction.

The group, whose members weren’t identified, will pay for the casino by exchanging at least $200 million in debt. The offer will be tested at an auction authorized by the bankruptcy court. Previously, Carl Icahn and other secured creditors said they intended to bid for the Atlantic City property.

Creditors currently are voting on Tropicana’s companion Chapter 11 plans. The plans are supported by the creditors’ committee and lenders holding all of the claims for borrowed money.

The confirmation hearing for approval of the plans is scheduled to begin April 27. In addition to casinos in Las Vegas and Atlantic City, Tropicana’s other properties are in Evansville, Indiana; Vicksburg, Mississippi; Baton Rouge, Louisiana; Greenville, Mississippi; and Laughlin and Lake Tahoe, Nevada.

Debt includes $960 million in subordinated notes, $1.3 billion secured by a first lien on most of the assets except the Las Vegas casino where there’s effectively a second lien, and a $440 million secured loan with first lien on the Las Vegas property.

New Jersey state regulators took away the gaming license for the Atlantic City property in late 2007, gave control to a conservator, and thus initiated a process culminating in the company’s filing under Chapter 11 in May.

The case is In re Tropicana Entertainment LLC, 08-10856, U.S. Bankruptcy Court for the District of Delaware (Wilmington).

Revised Bonus Program Approved for BearingPoint

BearingPoint Inc., the business consulting firm that filed for bankruptcy reorganization in February, gained approval yesterday from the bankruptcy judge for a modified bonus program for managing directors and senior managers. The judge limited the cost to $16.5 million.

The program was changed to require anyone who accepts a bonus to give it back if she or he refuses in good faith to negotiate with a buyer of the business. A bonus recipient is also precluded from making an agreement with one potential buyer that prohibits working for another bidder.

Originally filing with the objective of reorganizing, BearingPoint changed course last week and is proposing to sell the businesses at auction on April 15.

Once the consulting arm of KPMG LLP, BearingPoint was spun off in 2000 and went public in 2001. The petition listed assets of $1.76 billion against debt totaling $2.23 billion.

The case is In re BearingPoint Inc., 09-10691, U.S. Bankruptcy Court, Southern District New York (Manhattan).

German Liquidator of TallyGenicom Is Held in Contempt

The German liquidator for TallyGenicom AG, a subsidiary of TallyGenicom LP, was held in contempt by a bankruptcy judge in Delaware for interfering with the sale of the U.S. company’s assets.

TallyGenicom, a provider of industrial-class printers, entered Chapter 11 in January and was authorized by the bankruptcy judge earlier this month to sell the business to Printronix Inc. for $36.6 million. The liquidator for the German subsidiary unsuccessfully opposed the sale, failed to have the sale delayed pending appeal and filed a Chapter 15 petition in Boston for the German subsidiary, hoping the parallel bankruptcy proceeding would bring the sale to a halt.

The German liquidator claimed that the German side of the company owned the intellectual property that was part of the sale by the U.S. branch.

In an order signed March 27, the bankruptcy judge ruled that the German liquidator was in contempt of court for interfering with the sale. The judge said there will be another hearing to decide how much to assess in damages for contempt.

The bankruptcy judge yesterday transferred the Chapter 15 case for the German company from Boston to his court in Delaware.

The Chapter 11 petition by the Chantilly, Virginia-based company listed assets of $34 million against debt totaling $62 million. Debt includes $37.7 million owing on a secured revolving credit and term loan and $8 million on a second-lien loan. Unsecured claims are approximately $16 million, according to a court filing. The second-lien lender and equity sponsor is Arsenal Capital Partners LP and affiliates, according to a court filing.

The case is In re TallyGenicom LP, 09-10266, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Drug Fair Group Creditors’ Committee Is Appointed

Drug Fair Group Inc., the operator of 58 drug and general merchandise stores, has an official committee of unsecured creditors to serve in the Chapter 11 reorganization begun March 18.

The seven members of the committee include the drug supplier Cardinal Health Inc. (CAH), a utility company, two other trade suppliers and landlord representatives.

Drug Fair aims to sell 32 stores to Walgreen Co. (WAG) for $54 million unless someone makes a better offer at auction. A hearing to approve sale procedures will be held tomorrow.

The stores belonging to Somerset, New Jersey-based Drug Fair are in central and northern New Jersey. The retailer is indirectly owned by Sun Capital Partners Inc., a private-equity investor based in Boca Raton, Florida. Drug Fair is the 11th of 12 investments by Sun Capital to begin Chapter 11 since January 2006. Sun Capital acquired the business in December 2005.

Court papers listed assets of $90.7 million against $120.3 million in debt as of July 31. Debt includes $44.1 million owing on a first-lien revolving credit. Second-lien lenders are owed $20.5 million on a term loan. The first-lien lenders are providing a $40 million secured credit good for four months.

Walgreen has almost 6,700 stores that generated $59 billion revenue in 2008.

The case is In re Drug Fair Group Inc., 09-10897, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Creditors Fight Midway Bonuses as Retention Payments

Midway Games Inc., the creator of Mortal Kombat and other video games, is in bankruptcy court today answering objections by the official creditors’ committee and the U.S. Trustee to the company’s proposed $3.76 million bonus program for 29 employees who weren’t identified by name.

Both the committee and the U.S. Trustee, an arm of the U.S. Justice Department, argue that the proposal is a disguised retention bonus program outlawed by Congress in bankruptcy cases. The committee says the payments to management could be large, while the recovery by unsecured creditors “could very possibly be quite small.”

The company said in a court filing that it is modifying the program to raise the threshold performance standards and reduce the payments.

Midway filed under Chapter 11 in February, listing assets of $168 million and debt of $281 million. Including the balance sheets of foreign subsidiaries not in bankruptcy, the asset and liability totals are $178 million and $337 million.

Midway’s debt includes $150 million in convertible notes, $29 million on a secured term loan and revolving credit, $40 million on a secured loan facility and $20 million on a subordinated loan. Unsecured claims by suppliers total $96 million, the company said in a court filing.

The case is In re Midway Games Inc., 09-10465, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Strauss Discount Auto Gets Approval for $20 Million in Financing

Strauss Discount Auto, an 86-store auto-parts retailer formally named Autobacs Strauss Inc., received final authorization yesterday for a $20 million secured loan provided by KRC Capital Services LLC.

Although it said it has enough cash to operate, Strauss told the bankruptcy judge it needed the line of credit to assure suppliers there is sufficient financing to pay expenses.

Strauss is conducting going-out-of-business sales at 12 stores that are closing.

The new Chapter 11 case begun in early February is the third for Strauss. The preceding Chapter 11 plan for the company, then formally named R&S Parts & Service Inc., was confirmed in April 2007.

The Strauss stores are in New York, New Jersey and Pennsylvania. The new petition listed assets of $75 million against debt totaling some $72 million. The current owner is Japan’s Autobacs Seven Co. (9832)

Debt includes $42.4 million owing to the parent under loan agreements, $9.6 million owing to suppliers and $12 million in debt owing to landlords and other unsecured creditors. There was no secured debt before bankruptcy.

The assets include $33 million in inventory at cost and $23 million of real property.

The new case is In re Autobacs Strauss Inc., 09-10358, U.S. Bankruptcy Court, District of Delaware (Wilmington). The prior case is In re 1945 Route 23 Associates, 06-17474, U.S. Bankruptcy Court, District of New Jersey (Newark).

Uni-Marts Settles With Defaulting Buyer Atlantis Petroleum

Uni-Marts LLC, the owner or operator of 283 convenience stores and gasoline stations in Pennsylvania, New York and Ohio, reached a settlement with Atlantis Petroleum LLC, the buyer that couldn’t complete a court-approved purchase of the assets.

The bankruptcy judge in September approved the sale to Atlantis for $17.7 million. After first extending the closing date, Uni-Marts terminated the contract in December when Atlantis couldn’t nail down necessary financing.

To settle disputes over breach of contract, Uni-Marts agreed to take the $500,000 deposit posted by Atlantis and otherwise give up any other claims against the erstwhile buyer.

The settlement will be up for approval at an April 15 hearing.

Uni-Marts’ debt includes $21.5 million owing to trade suppliers and $14.2 million for mortgages on stores in Ohio. The State College, Pennsylvania-based company at one time had 485 stores in five states. It was taken private in 2004 by the Sahakian family and private-equity investors.

The case is In re Uni-Marts LLC, 08-11037, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Eva-Tone to Sell Optical Disc Equipment at Auction

Eva-Tone Inc., a manufacturer of CDs and DVDs based in Clearwater, Florida, will sell the equipment from its optical-disc business for $405,000 unless a higher bid turns up at an auction on April 3.

Under sale procedures approved last week, other bids are due tomorrow. The hearing to approve the sale will be held later on the day of the auction.

The proposed buyer of the equipment is Goindustry USA Inc.

Eva-Tone said in court papers that the optical-disc business generated less than half of its revenue yet more than half of its expenses. Revenue shrank to $28 million in 2008 from $36 million in 2007.

The secured lender is owed $2.6 million.

Eva-Tone entered Chapter 11 in November in Tampa, Florida, to head off a dispute with the landlord.

Court papers say debt and assets are both less than $50 million while the 20 largest unsecured claims total $3.9 million.

The case is In re Eva-Tone Inc., 08-17445, U.S. Bankruptcy Court, Middle District of Florida (Tampa).

Briefly Noted

The bankruptcy court will decide on April 7 about auction procedures for the sale of the market-making business owned by Bernard L. Madoff Investment Securities Inc. The court filing by Madoff’s trustee didn’t include a proposed auction date. The trustee has an agreement to sell the business for a minimum of $500,000 to Castor Pollux Securities LLC. The price could rise to as much $15.5 million depending on the level of revenue generation through 2012. Bernard Madoff, the firm’s founder, was arrested in December and pleaded guilty on March 12 to defrauding investors of as much as $65 billion and faces a prison term up to 150 years for the Ponzi scheme he was conducting. His bail was revoked and he went immediately to jail following the plea. The Madoff firm’s liquidation in U.S. Bankruptcy Court commenced in December with the appointment of the trustee under the Securities Investor Protection Act. The SIPA case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities Inc., 08-01789, U.S. Bankruptcy Court, Southern District New York (Manhattan).

Muzak Holdings LLC, a provider of music programming for businesses, projected that cash of $20.2 at the outset of the bankruptcy reorganization in February will be reduced to $10.4 million by August. Sales over the period are predicted to be $147 million, according to a report filed with the bankruptcy court in Delaware. Muzak has approval to use cash until Aug. 15 and said at the outset of the Chapter 11 case that it doesn’t need outside financing. The petition listed assets of $324 million against debt totaling $465 million. Debt includes $101 million owing on a senior secured credit facility, $220 million in senior notes and $115 million in subordinated notes. Sales in 2008 were $249 million. The Fort Mill, South Carolina-based company said it intends to use Chapter 11 to “right size our capital structure.” The case is In re Muzak Holdings LLC, 09-10422, U.S. Bankruptcy Court, District of Delaware (Wilmington).

American Fibers & Yarns Co., a producer of dyed yarns for the auto and apparel industries that filed under Chapter 11 in September, sold one facility and is working on the sale of a second. It says it’s therefore entitled to a second extension of the exclusive right to propose a reorganization plan. The new deadline would be July 20 if the bankruptcy judge agrees at an April 14 hearing. The company also needs to collect accounts receivable before it can complete a plan. The company said the same unresolved problems were outstanding when it sought the previous extension of exclusivity. The motion filed last week says plan discussions with the creditors’ committee have begun “informally.” AFY already was authorized to sell the machinery and equipment for $1.55 million and separately sold 21.1 acres in Bainbridge, Georgia, for $1.5 million. It listed assets of $44.1 million against debt totaling $15.9 million. Unsecured creditors were listed for $7.9 million. The secured lender is General Electric Capital Corp. American Fibers is controlled by affiliates of private-equity investor Monitor Clipper Partners, which is also the equity sponsor of another Chapter 11 debtor, Recycled Paper Greetings Inc. The case is In re AFY Holding Co., 08-12175, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Downgrades

Starwood Demoted to Junk by Moody’s on Lower RevPAR

Starwood Hotels & Resorts Worldwide Inc. (HOT), a luxury hotel operator, lost investment-grade status yesterday from Moody’s Investors Service, matching the demotion to junk by Standard & Poor’s in December.

The corporate rating from Moody’s is now Ba1, the highest junk grade.

Moody’s expects revenue per available room could decline this year about 17 percent.

White Plains, New York-based Starwood owns or operates 900 properties in 100 countries.

Starwood fell $1.28 yesterday to $12.63 in New York Stock Exchange trading. The high in the last two years was $75.09 on July 13, 2007.

Bon-Ton Downgraded Again on Lower Sales and Income

Bon-Ton Stores Inc. (BONT), a chain of 280 department stores, was downgraded a third time inside 14 months by Moody’s Investors Service. Yesterday’s two-notch demotion to a Caa2 corporate grade comes on top of the previous ding in January.

Moody’s reacted again so quickly in light of the company’s disclosure that fourth quarter sales were down 9.4 percent while operating income was off 40 percent.

The company is predicting that comparable-store sales will decline up to 9 percent.

The senior unsecured notes went down two spaces also to Caa3.

Bon-Ton’s working capital credit matures in March 2011. If the facility is extended, Moody’s said the ratings could be upgraded “modestly.”

Moody’s believes Bon-Ton will have enough cash so long as suppliers don’t cut back on credit.

The stores are in 23 states under the names Bon-Ton, Bergner’s, Boston Store, Carson Pirie Scott, Elder-Beerman, Herberger’s and Younkers.

The company doubled in size by paying Saks $1 billion for 142 stores in 2006. Revenue was $3.1 billion for 12 months ended in January.

Sabre Downgraded on Lower Travel Bookings

Sabre Holdings Corp., the operator the world’s largest computer system used in the travel industry for airline, rental cars and hotels reservations, was downgraded yesterday by one notch to a B corporate rating in view of what Standard & Poor’s called a “significant decline” in travel bookings.

S&P said Southlake, Texas-based Sabre is “highly leveraged” and has “limited access to capital” following the $5.4 billion acquisition in 2007 by Silver Lake Partners and TPG Inc.

Sabre lost investment grade when the leveraged buyout was first announced and was lowered again to a B+ rating when the acquisition was completed.

Colonial Realty REIT Demoted to Junk by Second Rater

Colonial Realty LP and affiliate Colonial Properties Trust, a real estate investment trust, lost investment grade status yesterday from Standard & Poor’s.

The new S&P ratings at BB+ match the demotion to junk issued last week by Moody’s Investors Service.

With 35,500 apartment units, Colonial is a specialist in multifamily housing in the southern U.S.

S&P said that Colonial is “adequately positioned” to deal with debt maturities this year and in 2010. Moody’s lauded Birmingham, Alabama-based Colonial for slowing the development of new projects.

Commercial Vehicle Group Downgraded Again, Now Caa2

Commercial Vehicle Group Inc. (CVGI), a supplier of interior systems for cabs of heavy-duty trucks, received a second downgrade in two months from Moody’s Investors Service.

The new Caa2 corporate peg, down another two steps, results from Moody’s concern about “near-term liquidity” stemming from “severe, ongoing deterioration in the commercial vehicle market.”

Moody’s says there is “limited” time for a “turnaround” in view of the possibility of operating losses that would erode cash and result in loan-covenant violations.

New Albany, Ohio-based company had revenue of $763 million in 2008.

Carlyle’s United Components Hit By Lower Miles Driven

United Components Inc., a supplier of non-discretionary aftermarket auto parts, is feeling the effect of fewer miles driven and consumers’ more conservative spending habits.

Moody’s lowered the senior secured credit facility to a B1 rating while the subordinated notes fell to Caa2. The holding company, UCI Holdco Inc., now has a Caa1 corporate rating after yesterday’s action.

The company has a $75 million revolving credit that matures in June. Moody’s says the company is considering operating without it.

Revenue for the Evansville, Illinois-based company was some $880 million in 2008.

United Components is controlled by Carlyle Group.

S&P Easier on Ahern Rentals than Moody’s

Standard & Poor’s isn’t on the same page with Moody’s Investors Service when it comes to Ahern Rentals Inc., an equipment supplier with 48 locations in the Southwest U.S.

Where Moody’s early in March lowered Ahern to a Caa2 corporate peg, S&P yesterday reduced the rating to B, three notches higher.

When S&P saw “potential covenant pressure in the near term,” Moody’s perceived a “significantly” increased risk of violating a covenant on the revolving credit.

Moody’s expects non-residential construction to remain in decline “through 2010.”

The Las Vegas-based company has 35,000 pieces of equipment.

S&P Lines up with Moody’s on Gibraltar Industries

Gibraltar Industries Inc. (ROCK) received a second downgrade in just over two months from Standard & Poor’s. After yesterday’s action, the corporate peg from S&P is now B+, a match for the demotion handed out in January by Moody’s Investors Service.

S&P isn’t forecasting a loan covenant violation. Moody’s said that the “significant drop” in cash flow at the Buffalo, New York-based company will put pressure on covenant compliance.

Gibraltar is a manufacturer, processor, and distributor of metals and engineered products for the building and auto industries.

Mining Equipment Maker Terex Lowered to Ba3 Corporate

Terex Corp. (TEX), a manufacturer of large off-road trucks and heavy equipment, was downgraded yesterday by one grade to a Ba3 corporate rating from Moody’s Investors Service.

Revenue last year for the Westport, Connecticut-based company was almost $10 billion.

To contact the reporter on this story: Bill Rochelle in New York at wrochelle@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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