S&P cuts LifeScan, corrects recovery ratings

S&P said it lowered the issuer credit rating on LifeScan Global Corp. to CCC- from CCC+, the issue-level rating on its exchange super-priority revolver to CCC+ from B, the issue-level rating on its exchange first-lien term loan to CCC- from CCC+ and the issue-level rating on its exchange second-lien term loan to CC from CCC.

At the same time, S&P lowered the issue-level rating on the company’s non-exchange third-lien term loan to CC from CCC+ and the issue-level rating on its non-exchange third-lien revolver to CC from B.

These downgrades incorporate the correction of an error in S&P’s recovery analysis and the recovery and issue-level ratings S&P assigned on the basis of that analysis in May 2023. Under S&P’s corrected recovery analysis, the agency treats the non-exchange debt as third-lien obligations, rather than as first-lien, in the case of the term loan, and super priority, in the case of the revolver.

As a result, S&P said it corrected the recovery ratings on the non-exchange term loan to 5 from 3 and on the non-exchange revolver to 5 from 1. Accordingly, the lower issue-level ratings S&P is now assigning on the non-exchange debt reflect notching guidelines for a 5 recovery rating, as opposed to the notching guidelines applicable to a 3 and a 1 recovery rating.

“The negative outlook reflects LifeScan's constrained liquidity and weak operating trends, which could lead to a covenant breach or distressed exchange in the next six months,” S&P said in a news release.

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