Moody’s raises ConvaTec to Ba3

Moody's Investors Service said it upgraded ConvaTec's corporate family rating to Ba3 and probability of default rating to Ba3-PD.

There are no changes to the Ba3 instrument ratings Moody's assigned on Oct. 3 to ConvaTec's new senior secured credit facilities, including its $1.37 billion term loan A, $430 million term loan B and $200 million revolver.

All other ratings were withdrawn.

Lastly, the agency assigned a speculative grade liquidity rating of SGL-1.

The outlook is stable. This concludes the review of ConvaTec's ratings.

Moody's noted that as part of this action, it is relocating the corporate family rating to ConvaTec Healthcare D Sarl from ConvaTec Healthcare A Sarl for administrative purposes.

The upgrades of ConvaTec's corporate family rating to Ba3 and probability of default rating to Ba3-PD reflect the company's use of $1.8 billion of IPO proceeds to reduce its financial leverage.

The agency estimated that pro forma adjusted debt to EBITDA as of June 30 is about 4.3 times, marking a dramatic improvement in ConvaTec's leverage prior to the IPO.

"The material reduction in debt and hence interest expense will boost ConvaTec's free cash flow and provide the means for further deleveraging," Moody's vice president and senior analyst Jonathan Kanarek said in a news release.

"Generating approximately $200 million per annum in free cash flow after common dividends should help bring leverage to around 3.5 times debt/EBITDA by the end of 2017."

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