S&P affirms Mallinckrodt

S&P said it affirmed its B- issue-level rating on the existing first-lien debt of Mallinckrodt plc. The recovery rating is unchanged at 1, reflecting an expectation for very high recovery (90%-100%; rounded estimate 95%) in the event of a payment default.

Mallinckrodt entered into an agreement with certain investors to exchange $495 million of its senior unsecured notes due April 2020 in a par-for-par transaction for 10% first-lien notes due 2025. The company plans to pay the remainder of its 2020 notes with cash.

“We do not consider this a distressed exchange because we think the noteholders were adequately compensated for the extension in maturity with higher priority in the capital structure and a higher interest rate,” S&P said in a news release.

S&P said it also affirmed the CC issue-level rating on the senior unsecured and nonguaranteed unsecured debt. The 6 recovery rating is unchanged, and S&P continues to expect negligible (0%-10%; rounded estimate 0%) recovery for those tranches.

The CCC long-term issuer credit rating and negative outlook are unchanged “because we see a possibility of a distressed exchange or default in the next 12 months,” S&P noted in the release.

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