S&P rates Kinetic Concepts notes BB-

Standard & Poor's assigned its BB- issue-level ratings to Kinetic Concepts Inc.'s proposed issuance of $400 million of senior secured first-lien notes. KCI USA Inc. is a co-issuer of the notes.

S&P assigned a recovery rating of 1 to these notes, reflecting the expectation for very high recovery (90% to 100%) on these obligations in the event of a payment default.

S&P expects the company to use proceeds to refinance the $312 million of term loan E-2 (USD) and to cover associated fees. The remaining proceeds will be available for general corporate purposes.

S&P’s B corporate credit rating on Kinetic Concepts reflects the agency’s assessment of the company's business risk as fair and the financial risk profile as highly leveraged. The outlook is stable.

The assessment of a fair business risk profile reflects significant product concentration (negative pressure wound therapy based 'VAC' devices account for about 70% of revenues), pricing pressure within its advanced wound therapeutics product categories following the expiration of Kinetic's patent on negative pressure wound therapy, and the company's limited geographic diversity with roughly 75% of revenues derived in the Americas.

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