Moody's cuts Alion, rates loan, notes Ba3

Moody's Investors Service said it downgraded Alion Science and Technology Corp.'s corporate family and probability-of-default ratings to B3 and the rating on the $250 million 10¼% senior unsecured notes due 2015 to Caa1 (LGD4, 68%) from B3.

The agency also assigned the issuer's $50 million senior secured revolving credit facility due 2013 and $222 million senior secured term loan B due 2013 at Ba3 (LGD2, 16%). The speculative grade liquidity rating of SGL-3 was affirmed.

The outlook was changed to stable from negative.

In February 2007, Alion extended the maturity date of the term B senior credit facility to Feb. 6, 2013 and completed a recapitalization which included the higher-than-expected sale of $250 million of its 10¼% senior unsecured notes due Feb. 1, 2015 to repay its $170 million bridge loan for the acquisition of Anteon and $72 million under the term B facility.

The downgrade of the corporate family rating reflects the expectation that leverage and interest coverage will remain above the stated rating triggers in the credit opinion dated December 2006, Moody's said. The downgrade also reflects an expectation that free cash flow will be lower than projected and substantial near term refinancing needs could further reduce free cash flow, the agency said.

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