Moody's cuts Loewen Group's senior notes.
(Press release provided by Moody's Investors Service)
NEW YORK, March 18 - Moody's Investors Service lowered the
ratings of The Loewen Group Inc. (''Loewen''), reflecting the
challenges that the company will face in meeting its debt service
obligations throughout 1999 and the likely low value of assets supporting the company's debt.
The senior implied rating has been lowered to Caa3 from Caa1. The outlook is changed to stable from negative.
Ratings lowered are:
The Loewen Group Inc. Guaranteed senior notes to Caa3 from
Caa1;
Guaranteed senior unsecured shelf registration to (P)Caa3
from (P)Caa1;
Guaranteed monthly income preferred shares (MIPS) to ''c'' from ''ca'' Loewen Group Capital L.P. Backed preferred stock to ''c'' from ''ca'' The Loewen Group International Inc.
Guaranteed senior secured revolving credit facility to Caa3 from Caa1;
Guaranteed senior notes to Caa3 from Caa1;
Guaranteed senior unsecured shelf registration to (P)Caa3 from (P)Caa1
Loewen Pass-Through Asset Trust 1997-1 Pass-Through Asset Trust Securities (PATS), due 1999, to Caa3 from Caa1
Loewen's financial flexibility is extremely tight. Its currently negative free cash flow makes it dependent on a continuation of liquidity support to meet upcoming debt service payments and has led
the company to announce a deferral of quarterly dividend payments on its preferred stock scheduled for April 1, 1999 and of the monthly dividend payment on the MIPS.
While the company is currently attempting to improve its free cash flow, it is unlikely that this improvement will be sufficient and rapid enough to meet all 1999 debt payments, which include a $300
million repayment to current PATS bondholders on October 1, 1999.
Additional asset divestitures, on top of a recently announced sale of a group of East Coast properties for gross proceeds of $193 million, appear necessary to raise liquidity.
However, additional divestitures would occur in an environment where potential buyers are not eager to pay high prices.
Recent lower death rates and stock underperformance have led several deathcare industry participants to curtail their acquisition programs over the medium term.
This negative environment for industry asset valuations is exacerbating the already low coverage of debt by the operating assets of the company, increasing the expectations of severity of loss for
bondholders in an event of default.
While the company has announced an extension of its asset divestiture program, it is unlikely that future asset sales would result in an improvement of this coverage.
Based in Burnaby, British Columbia, The Loewen Group Inc. is the second largest operator of funeral homes and cemeteries in North America. |
