S&P rates Acelity B, affirms Kinetic

S&P said it affirmed its B corporate credit rating on Kinetic Concepts Inc. and assigned a B corporate credit rating to parent entity Acelity LP Inc.

The outlook is positive.

In addition, S&P affirmed the B issue-level rating on the senior secured first-lien debt and first-lien senior secured notes. The 3 recovery rating indicates expectations for meaningful (50%-60%; rounded estimate: 60%) recovery for creditors in a payment default.

The agency also affirmed the B- issue-level rating on the company's third-lien senior secured notes. The recovery rating is 5, indicating expectations for modest (10%-30%; rounded estimate: 10%) recovery.

Acelity used the majority of its $2.9 billion in proceeds from the sale of its LifeCell business to Allergan plc in early 2017 to repay outstanding debt, resulting in significantly lower interest expense, S&P said.

However, the company's 2017 free operating cash flow generation fell short of expectations, driven by elevated one-time costs associated with the sale of its LifeCell business, legal settlements, a recent disruption in its European distribution channel and working capital outflows relating to the divestiture, the agency added.

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