Standard & Poor’s relegated Kinetic Concepts Inc.’s bonds into junk status after a consortium led by Apax Partners took the wound care giant private last week.
The rating agency knocked its stance on KCI bonds down four rungs from "BB+" to "B," according to MarketWatch.
Apax and a pair of Canadian pension funds paid $68.50 per share for KCI in a leveraged buyout that closed Nov. 4. The $6.1 billion LBO obviously means KCI is now highly leveraged and thus a riskier bet, according to S&P.
Standard & Poor’s also said KCI’s outlook is stable and that its ratio of adjusted debt to EBITDA (earnings before interest, taxes, depreciation and amortization) should fall once it stops paying out royalties to Wake Forest University. KCI is also cutting costs, a further boon to the debt:EBIDTA ratio.
KCI "has high interest expenses and will operate with a stretched financial-risk profile for at least the next two years," according to the ratings firm, but "its pro-forma-liquidity profile is adequate," MarketWatch reported.
Analysts’ ups and downs