S&P downgrades UCI

Standard & Poor’s said it lowered the corporate credit rating on UCI Holdings Ltd. to CCC from CCC+, along with the rating on the company’s unsecured debt to a CCC- from CCC.

The recovery rating on this debt remains at 5, indicating 10% to 30% expected default recovery.

The agency also said it placed all of the ratings on UCI on CreditWatch with negative implications.

S&P said it believes there is at least a one-in-two likelihood of default within the next 12 months.

The company recently announced that it plans to exercise its grace period with respect to a $17.25 million interest payment due on its 8 5/8% senior unsecured notes, which raises concerns about its ability to meet this debt obligation, the agency said.

Under the terms governing the notes, the company has a 30-day grace period for interest payments, S&P said.

While the company believes it has sufficient liquidity to continue meeting all of its obligations to employees, customers and suppliers during the grace period, the decision to delay making its interest payments could indicate that the company might engage in an exchange offer that would be deemed as a selective default, the agency said. Or the company could be considering filing for bankruptcy, S&P added.

The CreditWatch placement will be resolved in the next 90 days after greater clarity is known as to the company’s future strategic plans, the agency said.

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