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Related Issuers
Rating Action:

Moody's assigns B1 to Hologic's new bond

18 Jun 2015

New York, June 18, 2015 -- Moody's Investors Service ("Moody's") assigned Hologic, Inc.'s ("Hologic") new $1 billion senior unsecured notes a B1 rating. The company's Ba3 Corporate Family Rating (CFR), Ba3-PD Probability of Default Rating (PDR), and Ba1 senior secured credit facility ratings remain unchanged. Hologic has very good liquidity, as indicated by its SGL-1 speculative grade liquidity rating, and its rating outlook remains stable.

Proceeds from the new bond issue will be used to repay the company's outstanding $1 billion unsecured notes due 2020 in a leverage-neutral transaction. The refinancing is credit positive because it will extend the company's debt maturity profile and reduce interest expense modestly. Moody's will withdraw the rating on the 2020 bond upon closing.

Moody's took the following rating actions on Hologic, Inc.:

Ratings Assigned:

Senior unsecured notes at B1 (LGD 4)

Ratings Unchanged:

Corporate Family Rating at Ba3

Probability of Default Rating at Ba3-PD

Speculative Grade Liquidity Rating at SGL-1

Senior secured revolving credit facility at Ba1 (LGD 2)

Senior secured Term Loan at Ba1 (LGD 2)

The outlook is stable.

RATINGS RATIONALE

Hologic's Ba3 CFR incorporates its good scale, leading market positions within its core franchises and good revenue diversity by product and customer. The rating is also supported by the recurring nature of service contracts and consumables, which account for over half of Hologic's revenues. Further, the company generates good free cash flow, has strong interest coverage and has publicly committed to deleveraging.

The rating is constrained by Hologic's high, though improving, financial leverage stemming from the 2012 debt-financed acquisition of Gen-Probe. Moody's estimates adjusted debt to EBITDA was 4.2x for the twelve months ended March 28, 2015. However, this does not capture the premium over the principal or taxes associated with the convertible notes that Moody's expects the company will repay in FY17 and FY18. Including these obligations, leverage would approximate 4.7x. The ratings also reflect volatility that can occur in Hologic's financial performance because its businesses are sensitive to general medical utilization trends and fluctuations in hospital capital equipment spending. Further, activist investors including Carl Icahn own more than 15% of Hologic's shares, and Moody's believes event risk could rise if earnings growth does not continue to improve and the stock price becomes pressured.

Hologic's SGL-1 Speculative Grade Liquidity Rating reflects very good liquidity over the next 12-18 months supported by healthy cash balances and Moody's expectation of annual free cash flow in the $500 million range, which will be more than sufficient to satisfy its modest debt maturities and other cash needs. The $1 billion revolver size provides further support.

Moody's could upgrade the ratings if Hologic can generate sustained organic revenue growth and continue to repay debt such that the rating agency expects adjusted debt to EBITDA to be sustained below 3.5 times.

Moody's could downgrade the ratings if market uptake of Hologic's newer products fails to offset declines in older products, resulting in revenue and earnings erosion. Specifically, ratings could be downgraded if Moody's expects adjusted debt to EBITDA to be sustained above 4.5x times, or if liquidity deteriorates meaningfully.

The principal methodology used in these ratings was Global Medical Product and Device Industry published in October 2012. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Hologic, Inc. ("Hologic"; NASDAQ: HOLX) is a leading developer, manufacturer and supplier of premium diagnostic products, medical imaging systems and surgical products. The Company's core business units focus on diagnostics, breast health, GYN surgical, and skeletal health. Hologic reported revenues of about $2.6 billion in the twelve months ended March 28, 2015.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The following information supplements Disclosure 10 ("Information Relating to Conflicts of Interest as required by Paragraph (a)(1)(ii)(J) of SEC Rule 17g-7") in the regulatory disclosures made at the ratings tab on the issuer/entity page on www.moodys.com for each credit rating:

Moody's was not paid for services other than determining a credit rating in the most recently ended fiscal year by the person that paid Moody's to determine this credit rating.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

John Zhao, CFA
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns B1 to Hologic's new bond
No Related Data.
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​
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