Moody’s cuts DJO, loans, notes

Moody's Investors Service said it downgraded DJO Finance LLC's corporate family rating to Caa1 from B3 and probability of default rating to Caa1-PD from B3-PD.

At the same time, the agency downgraded DJO's senior secured credit facilities to B1 from Ba3, second priority senior secured notes to Caa2 from Caa1 and senior secured global notes to Caa3 from Caa2.

The outlook is stable. The speculative grade liquidity rating was affirmed at SGL-3.

Moody’s said the action reflects the company's operating performance weakness and deterioration of credit metrics beyond previous expectations. This is partially attributable to headwinds within DJO's Recovery Sciences division, which ultimately led to DJO's decision to exit its Empi business, which has faced declining reimbursement rates for its key product, TENS.

As a result, the company's near-to-intermediate-term credit metrics are unlikely to improve to levels that would support the previous rating.

For the year ended Dec. 31, 2015, DJO's adjusted financial leverage was roughly 10 times.

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