S&P rates Alphabet debt BB-, B, CCC+

S&P said it assigned a B corporate credit rating to Alphabet Holding Co. Inc.

The outlook is negative.

At the same time, the agency assigned a BB- issue-level rating to the proposed $350 million senior secured ABL due 2022, B issue-level rating to the proposed $1.4 billion senior secured first-lien term loan due 2024 and CCC+ issue-level rating to the $500 million senior secured second-lien term loan due 2025. The recovery rating on the ABL is 1, reflecting an expectation for very high (90%-100%; rounded estimate: 95%) recovery in the event of a payment default. The recovery rating on the first-lien term loan is 3, reflecting the expectation for meaningful (50%-70%; rounded estimate: 60%) recovery in the event of a payment default. The recovery rating on the second-lien term loan is 6, reflecting an expectation for negligible (0%-10%, rounded estimate: 0%) recovery in the event of a payment default.

S&P said the reflect Alphabet’s significant debt burden, aggressive financial policies and narrow business focus in the vitamins, minerals, herbs and supplements (VMHS) and active nutrition (AN) categories of the health and wellness industry.

The agency estimates pro forma debt to EBITDA in the high-7 times area and forecast improvement to the low-7 times area by fiscal year-end 2018 and mid-6x area by fiscal year-end 2019.

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