NEW YORK, May 16 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has
downgraded the senior note and senior subordinated note ratings of Sunterra
Corporation (NYSE: OWN) to 'CCC' (Triple-C). The ratings remain on Rating
Watch-Down where they were first placed on January 21, 2000.
The rating action follows the company's announcement that it failed to
make a scheduled interest payment on its $140 million 9.25 percent senior
notes that was due on May 15 as well as the occurrence of an event of default
under certain credit facilities due to non-payment.
The securities affected by this downgrade include:
$140 million 9.25 percent senior notes due 2006
'CCC' (Triple-C) from 'B' (Single-B)
$200 million 9.75 percent senior subordinated notes due 2007
'CCC' (Triple-C) from 'B-' (Single-B-Minus)
Additionally, the ratings of the company's $138 million 5.75 percent
convertible subordinated notes due 2007 have been reaffirmed at 'CCC'
(Triple-C), but also remain on Rating Watch-Down.
OWN's liquidity is extremely low as the company's severely weakened
operating performance combined with certain asset write-downs and one-time
charges have resulted in violations of net worth and net worth-related
financial covenants on several of its credit facilities, which has presently
placed the company without any external funding sources. As a result, OWN did
not have the ability to make mandatory payments of $4 million on its senior
bank credit facility and $1.1 million on its pre-sale line that were due on
May 1.
The company is presently negotiating with its banks and financial
institutions to seek waivers of these violations and to obtain their agreement
not to declare the entire indebtedness due and payable, which could trigger a
cross default on the above-rated notes. At the same time, OWN is pursuing
major asset sales to maintain the necessary liquidity to meet its debt
obligations and provide the necessary funds to continue operations.
Unsatisfactory resolution of these negotiations and initiatives could lead to
a further ratings downgrade to 'DD' (Double-D).
SOURCE Duff & Phelps Credit Rating Co.
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Related links:
http://www.dcrco.com
CONTACT:
Steven P. Altman, CPA, 312-368-2090,
altman@dcrco.com, Thomas P. Razukas, CFA, 212-908-0223,
razukas@dcrco.com, both of Duff & Phelps Credit Rating Co.
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