Moody's upgrades Convatec

Moody's Ratings said it upgraded Convatec Group plc’s long-term corporate family rating to Ba1 from Ba2 and its probability of default rating to Ba1-PD from Ba2-PD. Concurrently, the agency boosted the backed senior unsecured rating of the $500 million notes due 2029 to Ba1 from Ba2 and issued by 180 Medical Inc., a wholly-owned operating subsidiary of Convatec.

Convatec is expected to cut its leverage to 2.5x over the next 12-18 months and deliver healthy organic revenue. The company generates reliably positive free cash flow, and in 2023 significantly increased to more than $100 million from $29 million in 2022, which was hindered by higher capital investments and working capital outflows, Moody’s said.

“Credit constraints mainly include (1) social risks stemming from downward pricing pressure as payors seek to rein in healthcare costs, particularly in the more commoditized categories, as well as potential product litigation risks; (2) Convatec's limited outright market leadership in most of its segments and; (3) relatively lower margins compared to some competitors and similarly rated companies in the medical devices sector,” the agency said in a press release.

The outlook for both entities remains stable.

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