NEW YORK (Standard & Poor's) Standard & Poor's
Services said yesterday that it raised its corporate credit rating
Inc. to 'B+' from 'CCC'.
The rating was removed from CreditWatch where it had been placed
May 13, 2003. The outlook is stable.
In addition, Standard & Poor's assigned its 'BB-' rating to the
company's $60 million senior secured bank loan, and its 'B-'
rating to $205 million senior secured notes. The bank loan rating continues to be
is subject to review upon final documentation. The Erie,
had $213 million of debt outstanding as of March 31, 2003.
"The rating action is based on the successful refinancing of the
company's bank loan that was to mature in December 2003,
significant near-term concern," stated Standard & Poor's credit
Robert Lichtenstein. A material adverse outcome of the SEC and
Attorney investigations are not factored into the rating.
Rent-Way's senior secured notes are rated 'B-', two notches
the corporate credit rating, reflecting a material amount of
that is better positioned than the senior notes. Furthermore,
notes are only secured by a second priority lien, and are deemed
disadvantaged because they lack sufficient asset protection.
The ratings reflect the company's participation in the highly
and fragmented rent-to-own retail industry, the negative impact
accounting irregularities on the company over the past several
a highly leveraged capital structure. These risks are somewhat
the company's established position in its sector and operational
restructuring that has recently improved operating performance
strengthened financial controls.
The refinancing will improve the company's financial flexibility
significantly because maturities are extended and there are no
amortizations. The $60 million revolving credit facility matures
while the $205 senior notes mature in 2010.
Liquidity is limited to about $10 million in cash and about $20
of availability on the revolving credit facility. Standard &
expects that operating cash flow and the company's revolving
facility will be Rent-Way's primary sources to service its debt
its capital expenditures.
The stable outlook reflects Rent-Way's improved liquidity
refinancing its bank facility and paying down debt from the
the Rent-A-Center sale. Still, the company's highly leveraged
structure and the challenge of improving operations in the
rent-to-own retail industry could hinder progress.
Complete ratings information is available to subscribers of RatingsDirect,
Standard & Poor's Web-based credit analysis system, at
www.ratingsdirect.com. All ratings affected by this rating
action can be
found on Standard & Poor's public Web site at
under Fixed Income in the left navigation bar, select Credit
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