Derby's lacklustre financial performance in 2000, today's failure to meet interest payments on senior loans, and uncertainty over Derby's planned 'deleveraging', left international credit ratings agency Standard&Poor's no alternative but to downgrade the corporation's already dire credit rating. The D rating is the lowest rating possible

D-Day at Derby as S&P downgrade the corporation’s credit rating

The long-term corporate credit and bank loan ratings on Derby Cycle Corporation were today downgraded from CCC to D.

The rating on senior unsecured notes was lowered to D from CC. S&P say the downgrading follows the corporation’s announcement that it will not be making the scheduled interest payments on the $100 million amount of 10 percent senior notes and the DM110 million ($53 million) principal amount of 9.38% senior notes, ie big bank loans, due today.

Derby is also in default of the covenants on its DM209.4 million senior secured revolving credit facility and is unlikely that interest payment will be met within the 30-day grace period on the notes.

"Derby Cycle has been under significant financial pressure for the last few months following deterioration in its operating performance in the course of fiscal 2000. Despite having restructured at the end of 2000 the $30 million working capital requirement for its quarter one 2001 manufacturing operations, the company has found its financial resources insufficient to continue servicing the existing debt and is currently negotiating the restructuring of its outstanding securities with an informal committee of bondholders," said Anna Overton of Standard & Poor’s.

If Derby’s CEO Alan Finden-Crofts can pull off the ‘deleveraging’, via Deutsche Bank,

the current sponsors and bondholders – principally Thayer and Perseus – would lose their shirts. However, Finden-Crofts has long maintained that the existing bank lenders, and suppliers, would be paid in full.

In today’s filing to the US Securities and Exchange Commission (SEC), Simon Goddard, Derby’s Nottingham-based corporate controller, said:

"[Derby] has retained Lazard…as its financial advisor, and is working with an informal

committee of holders of more than 50% of the principal amount of its Senior

Notes for the purposes of negotiating a consensual restructuring of its

outstanding securities. The Company has advised the informal committee of

noteholders that any restructuring proposal made by the Company will (a) provide

for payment in full of all obligations to the Company’s trade creditors that

continue to support the Company with customary trade credit and (b) not have any

impact on the day-to-day operations with regard to employees, customers,

suppliers, distributors and general business."


See below for what CCC and D mean, plus a few previous stories on the Derby Cycle Corporation…


Here’s what Standard&Poor’s mean when they assign credit rating letters:


An obligation rated ‘CCC’ is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.


An obligation rated ‘CC’ is currently highly vulnerable to nonpayment.


A subordinated debt or preferred stock obligation rated ‘C’ is CURRENTLY HIGHLY VULNERABLE to nonpayment. The ‘C’ rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued. A ‘C’ also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments, but that is currently paying.


An obligation rated ‘D’ is in payment default. The ‘D’ rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor’s believes that such payments will be made during such grace period. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.


26/04/01 – Derby’s refinancing is "going well", says Raleigh MD

Philip Darnton, the Raleigh MD, told this morning that Lazards, the merchant bank organising Derby’s refinancing, has approached seven banks, two of which have started ‘due diligence’ on Derby companies worldwide. But will Gazelle be part of the mix or will its MBO go through?…/article.php3?id=1369

13/04/01 – Derby’s $51m loss: it’s a bit of a horror story

This afternoon the Derby Cycle Corporation filed its full annual return to the US Securities and Exchange Commission (SEC). Derby’s loss of $51m was revealed on on April 2nd when the Corporation applied for a 14-day extension of the deadline but today’s filing reveals the details behind the massive loss. The 223-page document contains plenty of blood-curdling material, appropriate since today is Friday the 13th……/article.php3?id=1341

11/04/01 – Derby’s Finden-Crofts on…

A US recipient of the print magazine has emailed suggesting non-UK viewers of this site would like to read the Alan Finden-Croft ‘boxout’ from our March issue. The Derby chairman was, as ever, frank. His views on Gary Matthews and the sale of Sturmey Archer deserve a wider audience, says our US source…/article.php3?id=1329

02/04/01 – Derby results delayed

The Derby Cycle Corporation should have filed its full annual report with the US Securities and Exhange Commission (SEC) today, but didn’t. However, as expected, headline losses are up.…/article.php3?id=1301

16/03/01 – Derby is to be “deleveraged”; Raleigh UK will have cash to move forward

The shareholders and bondholders will lose out in the forthcoming restructuring of the Derby Cycle Corporation, but the senior lenders and worldwide creditors will all be paid. The ‘deleveraging’ will mean local operating companies – such as Raleigh in Nottingham – will be able to move forward free of Derby’s debt mountain…/article.php3?id=1258

12/03/01 – Derby year end results will be “poor”

Raleigh staff have been warned that the results won’t make for pretty reading. However, there’s a silver lining, Derby is so heavily in debt it’s widely expected that the group will be split up and Raleigh freed of Derby’s debt millstone…/article.php3?id=1247

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