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S&P: Rapsod Trade Ltd. (Gallery Media) Downgraded To 'CC' On Potential Financial Restructuring; Outlook Negative

May 15, 2009 "Standard & Poor's"
PARIS (Standard & Poor's) May 14, 2009--Standard & Poor's Ratings Services said today that it lowered its long-term corporate credit and debt ratings on Russian outdoor advertising group Rapsod Trade Ltd. (Gallery Media) to 'CC' from 'CCC+'. The outlook is negative.

At Dec. 31, 2008, Gallery Media had gross on-balance-sheet debt of about $278 million.

"The downgrade follows Gallery Media's recent announcement that it has appointed advisors in view of a potential financial restructuring," said Standard & Poor's credit analyst Melvyn Cooke. "We consequently believe that a debt restructuring by the group is highly likely in the short term; this could result in a distressed exchange offer, which we would treat as a default under our criteria. In addition, we believe that a potential debt restructuring could hamper Gallery Media's willingness to pay the May 15, 2009, coupon on its $175 million senior secured notes."

While we believe that Gallery Media has sufficient cash to pay the upcoming coupon of about $9 million on May 15, 2009, it may choose not to do so in order to save cash at a time when it is considering restructuring its financial debt. In the event of nonpayment of financial interest by the group on its senior secured notes on the due date of May 15, 2009, we will aim to assess the likelihood of a payment prior to the end of the grace period of 30 days.

We would view any discounted exchange offer for part or all of the group's notes as distressed given the company's tight liquidity and deteriorating trading environment. The execution of distressed exchange offers are tantamount to default under our criteria. The recent announcement that Gallery Media has appointed advisors in view of a potential financial restructuring may be an indication, in our view, that management may be considering such an offer in the short term.

A positive rating action is unlikely at this stage and would likely require a material improvement in the group's liquidity position and trading conditions.
Company — Gallery Media
  • Full name
    Gallery Media Holding Ltd. BVI (Gallery)
  • Registration country
    Virgin Islands, British
  • Industry
    Other sectors