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Rating Action:

Moody's assigns definitive B2 corporate family rating to ConvaTec as well as definitive ratings to the company's recent debt issuance

21 Jan 2011

Frankfurt am Main, January 21, 2011 -- Moody's Investors Service has assigned definitive B2 corporate family and probability of default ratings to ConvaTec Healthcare B S.a.r.l. ("ConvaTec" or "the company") and also assigned definitive ratings to various debt instruments issued in December 2010 in the context of a refinancing of ConvaTec's previous financing package. ConvaTec's rated debt instruments include EUR300 million senior secured notes due in 2017 (definitive rating of Ba3), EUR250 million senior unsecured notes due 2018 (Caa1), USD745 million senior unsecured notes due in 2018 (Caa1), a USD250 million senior secured revolving credit facility due 2015 (Ba3) as well as a USD500 million and EUR550 million senior secured term loan due in 2016 (Ba3).

RATINGS RATIONALE

Moody's definitive ratings assigned today confirm the provisional corporate family, probability of default and instrument ratings assigned on 13 December 2010.

While the size of ConvaTec's new financing package and the terms and conditions of the various debt instruments are in line with what Moody's expected in its last rating action, Moody's notes that the allocation of debt amounts to the various debt instruments has changed as summarized below, leading to changes in the assigned LGD ranges and point estimates.

ConvaTec's financing package consist of a USD1,250 million senior secured term loan (consisting of USD500 million and EUR550 million, increased from initially USD850 million), a UD250 million senior secured revolving credit facility (unchanged) as well as EUR300 million senior secured notes (USD399 million equivalent, decreased from initially USD690 million), which all benefit from guarantees of group entities representing at least 85% of consolidated assets and EBITDA. The USD1,077 million senior unsecured notes (consisting of USD745 million and EUR250 million, decreased from initially USD1,180 million) benefit from the same, pari-passu ranking guarantees as the secured debt instruments. The secured debt instruments additionally benefit from first priority pledges over the majority of the group's assets, supporting the Ba3 rating of senior secured bank debt and notes (LGD3, 30% - initially LGD2, 28%), while the USD1,077 million senior unsecured notes carry a Caa1 rating (LGD5, 85% - initially LGD5, 83%). The company's preferred equity certificates are, based on the final documentation provided to Moody's, treated as 100% equity.

As outlined in Moody's Press Release dated 13 December 2010 (corrected on 17 December 2010), the B2 Corporate Family Rating reflects the initially weak credit metrics with an expected debt/EBITDA of approximately 6.4x after the refinancing, which is mitigated by the company's leading position in relatively non cyclical, and thus predictable markets, as well as ConvaTec's broad product portfolio, track record of product life-cycle management and innovation, solid geographic diversification and limited customer concentration.

The positive outlook reflects Moody's expectation that ConvaTec is well positioned to benefit from further growth in its end markets and that it will be able to maintain high levels of profitability and cash flow generation. In addition, the positive outlook assumes that ConvaTec will apply future positive cash flows to the repayment of debt supporting a continued deleveraging, as exemplified by a Debt/EBITDA ratio of 6.0x to be achieved within 12 months. Moody's notes that the positive outlook does not incorporate headroom for major extraordinary investment activity or acquisitions.

The principal methodology used in this rating was Global Medical Products & Device Industry published in October 2009.

ConvaTec is a leading developer, manufacturer and marketer of innovative medical technologies, in particular products for ostomy management, advanced chronic and acute wound care, continence care, sterile single-use medical devices for hospitals and infusion sets used in diabetes treatment infusion devices. For the last twelve months ending September 2010, ConvaTec reported revenues of USD1.5 billion and an adjusted EBITDA of USD435 million. Founded in 1978 as a division of Bristol-Myers Squibb, ConvaTec was acquired by private equity sponsors Nordic Capital and Avista Capital Partners in 2008.

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 assigning a credit rating.

The rating has been disclosed to the rated entity or its designated agents and issued with no amendment resulting from that disclosure.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the three years preceding the Credit Rating Action. Please see the ratings disclosure page www.moodys.com/disclosures on our website for further information.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or 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 Investors Service provides a date that it believes is the most reliable 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.

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Frankfurt am Main
Sabine Renner
Asst Vice President - Analyst
Corporate Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Paris
Eric de Bodard
MD - Corporate Finance
Corporate Finance Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's assigns definitive B2 corporate family rating to ConvaTec as well as definitive ratings to the company's recent debt issuance
No Related Data.
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