S&P rates Mallinckrodt loan BB+

S&P said it assigned its BB+ issue-level rating and 1 recovery rating to the proposed $1.862 million senior secured term loan B co-issued by Mallinckrodt International Finance SA and Mallinckrodt CB LLC and guaranteed by parent Mallinckrodt plc.

Proceeds will be used to refinance two of the company's outstanding senior secured term loans of equal amount.

The recovery rating of 1 reflects the expectation of very high (90% to 100%) recovery in the event of payment default.

In addition, the BB+ issue-level rating and 1 recovery rating on Mallinckrodt's senior secured debt will are unchanged after the proposed increase in the secured revolving credit facility to $1 billion.

The BB- issue-level ratings and 3 recovery ratings on the senior unsecured notes are also unchanged. However, the higher level of projected senior secured debt in the event of default, resulting from the revolver upsizing, moved the agency’s recovery expectation for the senior unsecured notes toward the lower end of the 50%-70% range.

The B issue-level rating and 6 recovery rating on the $300 million 3½% senior unsecured notes due April 2018 and the $600 million 4¾% senior unsecured notes due April 2023 are also unchanged. Lower recovery ratings on those tranches of senior unsecured notes reflect the guarantee from parent Mallinckrodt plc and the absence of guarantees from its subsidiaries, the agency explained.

Given Mallinckrodt's strong cash flow generation and the recently received $574 million from the sale of the nuclear imaging business, S&P said it does not view the revolver upsizing as a signal of anticipated liquidity difficulties.

© 2015 Prospect News.
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