S&P downgrades Deoleo

S&P said it downgraded Deoleo SA to SD from CC and removed it from CreditWatch with negative implications, where it was placed on Sept. 13. The agency also downgraded the ratings on the company’s revolving credit facility, first-lien notes and second-lien notes to D from CC. The recovery ratings on all rated debt are unchanged.

The downgrades follow Deoleo’s public announcement that a majority of shareholders approved certain conditions required for restructuring its syndicated debt. “We think the syndicated debt is now de facto restructured, since both syndicated creditors and shareholders have approved decisive steps of the restructuring process,” S&P said in a press release. The restructuring will swap debt for equity. Syndicated creditors will acquire 49% of the capital of the operating business.

“Under our criteria, we consider the distressed debt-to-equity swap to be tantamount to a default because syndicated creditors will receive less value than originally expected under the RCF, first-lien, and second-lien debt instruments,” said S&P.

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