Moody's: Kinetic Concepts view positive

Moody's Investors Service said it changed Kinetic Concepts, Inc.'s outlook to positive from stable, affirmed the corporate family and probability-of-default ratings at Ba2 and affirmed the guaranteed unsecured subordinated notes due 2013 at B1 (LGD5). The loss-given-default rate assigned to the notes was changed to 86% from 87%.

The agency also downgraded the company's guaranteed senior secured revolving credit facility due 2009 and guaranteed senior secured term loan B due 2010 to Ba2 (LGD3, 40%) from Ba1 (LGD3, 36%).

The positive outlook reflects the expansion of free cash flow and reduction of outstanding debt, Moody's said. Kinetic Concepts paid $238 million, or 53%, of total debt outstanding between Dec. 31, 2004 and March 31 and continued sales growth has fueled expanding free cash flow from $25 million in 2004 to $163 million for the 12 months ended March 31.

Concurrently, Moody's lowered the rating on the term loan B and revolver due to lower loss absorption following the repayment of subordinated debt in the capital structure.

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