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AMF Bowling’s Credit Rating Reduced to Caa3 on Refinancing Risk

AMF Bowling Worldwide Inc., the world’s largest bowling operator, received a two-level downgrade to Caa3 by Moody’s Investors Service.

Moody’s said the Richmond, Virginia-based company faces “material refinancing risk,” according to a Dec. 23 report. The ratings firm maintained a negative outlook on AMF’s $337 million of bank debt.

AMF’s $217 million first-lien term loan due 2013 traded at 84.6 cents on the dollar Dec. 23, down from 89.5 cents on January 3, according to information provider Markit Group Ltd.

“Moody’s is concerned about the company’s ability to refinance its capital structure in light of its high leverage and soft revenue trends,” analysts at the New York-based ratings firm Daniel Marx and Alexandra Parker wrote in the report. AMF said it’s preparing itself for sale and hired Moelis & Co., the investment bank founded by Kenneth Moelis, as a financial adviser, the analysts said.

AMF has leverage, or debt to earnings before interest, taxes, depreciation and amortization, of 7 times, according to the report.

The bowling operator has a $40 million first-lien revolving line of credit due 2012, a first-lien term loan due 2013 and an $80 million second-lien term piece due 2013, according to the analysts. The revolver is currently undrawn.

AMF operates 302 bowling centers. It filed for reorganization in July 2001 and emerged with a confirmed Chapter 11 plan in February 2002 by giving unsecured creditors 7.5 percent of the new stock.

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