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19 Jun 2001
MOODY'S ASSIGNS B1 TO OWENS & MINOR, INC.'S PROPOSED $200 MILLION SUB NOTES OFFERING; OTHER RATINGS CONFIRMED AND OUTLOOK CHANGED TO STABLE
Approximately US$ 332 Million of Debt Securities Affected.
New York, June 19, 2001 -- Moody's Investors Service assigned a B1 rating to Owens & Minor,
Inc.'s proposed rule 144A $200 million senior subordinated
notes due 2011. The company is issuing the notes to refinance its
existing $150 million senior subordinated notes due 2006 and for
general corporate purposes. The company may also use the proceeds
to refinance a portion of its convertible securities. At the same
time, Moody's is confirming the existing ratings for the company.
The ratings affected are as follows:
Owens & Minor, Inc.
· $200 Million Senior Subordinated Notes due 2011:
· $150 Million 10.875% Senior Subordinated
Notes due 2006: B1 (will be withdrawn)
· $132 Million 5.375% Convertible Junior Subordinated
Debenture due 2013: B2
· Senior Implied Rating: Ba2
· Senior Unsecured Issuer Rating: Ba3
Owens & Minor Trust I
· $132 Million 5.375% Term Convertible Securities
due 2013: "b2"
The rating outlook for the company is also being upgraded to stable from
The rating actions recognize the continued stability in the company's
operating and financial performance. In recent periods, Owens
& Minor has grown revenue and EBITDA moderately and has generated
steady cash flow from operations in the $60 million range (roughly
mid-to-upper-teens coverage of total debt).
Leverage and coverage have improved modestly as a result, with LTM
03/31/01 Debt/EBITDA declining to 3.5 times from 4.5 times
for the FYE 1999 (total debt includes accounts receivables securitization
and preferred securities). Coverage as measured by EBITDA/Interest
has increased to 4.1 times from 3.7 times over the same
Total debt has also declined to $378 million from $412 million,
as the company has been applying free cash flow to debt reduction.
The company has not engaged in any additional transactions since its purchase
of Medix. With the industry consolidating, Moody's was earlier
concerned that Owens & Minor may be forced to consider material acquisitions
to remain competitive. That concern was a key factor leading to
the change in outlook in 1999. However, given the recent
history, Moody's has gained additional comfort in the company's
acquisition strategy. Going forward, we expect the company
to be highly selective and primarily target small, niche companies
in the logistics area. Moreover, should an opportunistic
acquisition increase the company's leverage, we expect the company
to focus on de-leveraging quickly to return to current levels.
In addition to the company's leverage and potential acquisitions,
Moody's remains concerned about the significant competition and low growth
rate in the distribution industry. Margin pressure and concentration
of revenues in several large group purchasing organization contracts are
also major on-going challenges for the company. Offsetting
these issues are company strengths including its strong market position
and national distribution network, its experienced management team
and its leadership in using technology to provide innovative and value-added
services, such as WISDOM and CostTrack, to customers.
The company's opportunity for growth through providing logistic services
to manufacturers further supports the ratings.
Moody's notes that the rating on the new notes reflects its subordination
as well as subsidiary guarantees.
Owens & Minor, headquartered in Richmond, Virginia,
is a leading wholesale distributor of medical /surgical supplies.
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
No Related Data.
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