Moody's: Kinetic loan at Ba3

Moody's Investors Service said it assigned corporate family and probability of default ratings of B2 in connection with a proposed leveraged buyout of Kinetic Concepts, Inc.

The agency also said it assigned Ba3 (LGD 2, 26%) ratings to its proposed $2.6 billion first-lien term loan due 2018 and proposed $200 million first-lien revolver due 2016.

The ratings were assigned to Chiron Merger Sub, Inc.

The outlook is stable.

In July, a consortium of funds including Apax Partners and controlled affiliates of Canada Pension Plan Investment Board and Public Sector Pension Investment Board announced that they entered into a definitive agreement to acquire Kinetic Concepts through acquisition vehicle Chiron Merger Sub in a transaction valued at $6.3 billion, the agency said.

The ratings reflect high financial leverage and modest interest coverage on a pro forma basis, despite Kinetic's relatively strong profitability margins and good near-term liquidity profile, Moody's said.

The company faces product concentration risk, declining revenues in the therapeutic support systems segment and risks associated with increasing competitive and reimbursement pressures for the vacuum assisted closure franchise, which comprises about 70% of the company's revenues, the agency added.

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