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Moody’s rates ConvaTec D loans Ba3, reviews ConvaTec A
Moody's Investors Service said it assigned a Ba3 rating to the new first-lien senior secured credit facilities of ConvaTec Healthcare D Sarl.
The new senior secured credit facilities will include two term loans and a revolving credit facility.
Moody's also placed the existing ratings of ConvaTec Healthcare A Sarl, including the B2 corporate family rating and B2-PD probability of default rating, under review for upgrade.
Ratings on all existing debt are unchanged and will be withdrawn when they are repaid as part of the contemplated transaction.
If the IPO is not consummated and new debt is not issued, then ratings on all existing debt will remain outstanding. Also, if the IPO is not consummated, then Moody's said it expects that the three new bank credit facilities will not close, and that the agency will withdraw the newly assigned Ba3 ratings on those bank credit facilities.
ConvaTec plans to use proceeds from the $1.8 billion of aforementioned senior secured term loans and another estimated $1.8 billion from an initial public offering to refinance debt and reduce its financial leverage.
Moody's estimates that pro forma adjusted debt to EBITDA as of June 30 will be about 4.3 times, which would be a dramatic improvement in ConvaTec's leverage, which is currently around 8.2 times.
"The material reduction in debt and hence interest expense will boost ConvaTec's free cash flow and provide the means of further deleveraging," Moody's vice president and senior analyst Jonathan Kanarek said in a news release.
"Generating an approximate $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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