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Global Credit Research - 07 Oct 2010
Approximately $190 million of rated facilities affected
New York, October 07, 2010 -- Moody's Investors Service has upgraded CoActive Technologies,
Inc.'s (CoActive) corporate family rating (CFR) and probability
of default rating to Caa1 from Caa3. In addition, CoActive's
rating outlook has been changed to stable from negative.
The following ratings have been upgraded:
..Issuer: CoActive Technologies, Inc.
....Probability of Default Rating to Caa1
....Corporate Family Rating to Caa1 from Caa3
....$25 million senior secured revolving
credit facility due 2013 to B3 (LGD3, 33%) from Caa2 (LGD3,
....$118 million senior secured first
lien term loan due 2014 to B3 (LGD3, 33%) from Caa2 (LGD3,
....$47 million senior secured second
lien term loan due 2015 to Caa2 (LGD5, 81%) from Ca (LGD5,
The two notch ratings upgrade of the CFR to Caa1 reflects the ongoing
improvement in CoActive's operating performance and our expectation
that these trends will result in a substantial reduction in CoActive's
financial leverage over the coming quarters. We anticipate that
recent growth in CoActive's backlog, coupled with improvements made
to its cost structure over the past 18 months, will support the
continued expansion of CoActive's operating margins and should enable
the company to generate free cash flows, on a sustainable basis,
in the near term.
The Caa1 rating reflects a modest improvement to CoActive's liquidity
profile. In Moody's view, covenant pressures,
which were previously eased with the use of equity cures allowable in
the credit agreement, will be alleviated prospectively as a result
of the rapid improvement in earnings, repayment of the revolver
and reduction in amounts outstanding on the first and second lien term
loans over the past year. Further, the amendment to add the
Keypads business as a restricted subsidiary in the existing credit agreements
has improved both the collateral package and the earnings base that supports
the secured bank facilities.
Moody's would expect CoActive to generate positive cash flow on
a sustainable basis prior to further ratings upgrade. In addition,
a ratings upgrade would likely require CoActive to maintain balance sheet
leverage below 4.5x before upward ratings momentum surfaces.
While a ratings downgrade is not currently viewed as likely, degradation
in the company's liquidity profile would likely have negative ratings
The previous rating action on CoActive was the May 29, 2009 downgrade
of the CFR to Caa3 from B3.
The principal methodologies used in rating CoActive Technologies,
Inc. were Global Manufacturing Industry published in December 2007,
and Loss Given Default for Speculative-Grade Non-Financial
Companies in the U.S., Canada and EMEA published in
June 2009. Other methodologies and factors that may have been considered
in the process of rating this issuer can also be found on Moody's website.
CoActive is primarily engaged in manufacturing electronic components such
as switches, controls, dome arrays and keypads serving a wide
variety of end-markets that include off-road, consumer
electronics, automobile, industrial and distribution.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
MOODY'S considers to be reliable including, when appropriate,
independent third-party sources. However, MOODY'S
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
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used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Corporate Finance Group
Moody's Investors Service
Andris G. Kalnins
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's raises CoActive Technologies CFR to Caa1; outlook stable
250 Greenwich Street
New York, NY 10007
No Related Data.
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