S&P puts Lumentum convertibles on watch

S&P said it placed the rating on Lumentum Holdings Inc.’s convertible debt on CreditWatch with negative implications. Lumentum plans to secured added debt to help it acquire Coherent Inc.

“The CreditWatch placement on the convertible debt follows the announcement that Lumentum will issue a $2.1 billion senior term loan B (fully committed) to fund the acquisition of Coherent. The term loan will have a higher priority in the capital structure, which means we could notch down our rating on the convertible debt by a maximum of two notches,” S&P said in a press release.

Lumentum’s BB-'issuer credit rating and stable outlook are unchanged, the agency said.

“We are still reviewing the transaction, but we expect leverage to fall over the next 12-24 months to the high-2x area, which is in line with leverage of other BB- rated companies,” S&P said.

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