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I AGREE
21 Jan 2011
Approximately $1.2 billion of new debt rated
New York, January 21, 2011 -- Moody's Investors Service ("Moody's") affirmed the long-term ratings
of Kinetic Concepts, Inc ("KCI") including the Ba2 Corporate Family
Rating and Ba2 Probability of Default Rating. Concurrently we assigned
a Ba1 rating to the new $1.2 billion credit facility,
including a $550 million Term Loan A and a $650 million
revolver, both maturing in January 2016. Also, we assigned
a Speculative Grade Liquidity Rating of SGL-1 to KCI, reflecting
our expectation for very good liquidity over the next twelve months.
The outlook remains stable.
Ratings affirmed:
Corporate Family Rating, Ba2
Probability of Default Rating, Ba2
Ratings assigned:
$650 million Senior Secured Revolving Credit Facility due 2016,
Ba1, LGD2, 26%
$550 million Senior Secured Term Loan A due 2016, Ba1,
LGD2, 26%
Speculative Grade Liquidity Rating of SGL-1
Ratings withdrawn due to repayment and termination of prior credit facility:
$300 million Senior Secured Revolving Credit Facility due 2013,
Baa3, LGD2, 21%
$565 million Senior Secured Term Loan A due 2013, Baa3,
LGD2, 21%
The ratings outlook is stable.
RATINGS RATIONALE
The Ba2 Corporate Family Rating reflects KCI's considerable scale and
leading competitive position in the wound care market, as well as
the company's moderate financial policies and history of debt repayment.
The ratings are also supported by the proven clinical efficacy of the
V.A.C. product for use in intractable wounds,
and the large addressable markets of KCI's wound care and regenerative
medicine products. The ratings are constrained by KCI's product
concentration risk, as well as risks associated with the increasing
competitive and reimbursement pressures that the V.A.C.
franchise is facing.
"The new capital structure should give KCI considerably more flexibility
and liquidity to pursue acquisitions in order to grow and diversify.
Barring a significant increase in leverage, we would likely view
a prudent acquisition strategy favorably as product concentration risk
has been the main constraint to the ratings," said Jessica
Gladstone, Vice President --Senior Analyst.
If, over time, the company maintains a conservative financial
profile, including adjusted debt to EBITDA below 2.5 times,
and diversifies its revenue through new product introductions, international
expansion and acquisitions, there could be upward rating pressure.
Greater than expected competitive or pricing/reimbursement pressures impacting
the V.A.C. franchise would be the main driver for
downward rating pressure. While the company has flexibility at
the current rating level, debt-funded acquisitions or share
repurchases that exceed our expectations, such that if adjusted
leverage were expected to be sustained above 3.5 times, could
cause a downward rating action.
The principal methodologies used in this rating were Global Medical Products
& Device Industry published in October 2009, and Loss Given
Default for Speculative-Grade Non-Financial Companies in
the U.S., Canada and EMEA published in June 2009.
For further details, refer to Moody's Credit Opinion on Kinetic
Concepts on www.moodys.com.
Kinetic Concepts, Inc. (NYSE: KCI), headquartered
in San Antonio, Texas, is a global medical technology company
with leadership positions in advanced wound care, regenerative medicine
and therapeutic support systems (i.e., medical beds).
The company's advanced wound care systems incorporate proprietary V.A.C.
technology. KCI reported revenues of approximately $2.0
billion for the twelve months ended September 30, 2010.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
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validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
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and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Jessica Gladstone
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Lenny J. Ajzenman
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's affirms KCI's Ba2 CFR; senior secured credit facility rated Ba1
No Related Data.
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