Moody's views Owens & Minor negatively

Moody's Investors Service said it revised the outlook for Owens & Minor, Inc. to negative from stable. Concurrently, Moody's affirmed Owens & Minor's existing ratings, including its Ba3 corporate family rating, its Ba3 senior secured rating and its B2 senior unsecured rating. Moody's downgraded the speculative grade liquidity rating to SGL-2 from SGL-1.

“The revision of the outlook to negative reflects Moody's expectation that Owens & Minor will not be able to reduce its leverage as quickly as previously anticipated at the time of the acquisition of Apria in March 2022. The company had a weak operating performance as the pandemic tailwinds subsided amid an intense competitive environment. Financial leverage for the FY 2022 was 4.7x which Moody's expects will remain elevated before declining towards 3.5x by 2024,” the agency said in a press release.

The weaker SGL rating mirrors an expectation of reduced cash generation in 2023 due to weaker operating performance and related reduction in covenant headroom. “Furthermore, Moody's expects that Owens & Minor might have to draw on its revolver (or use its A/R securitization facility) to repay the 2024 maturity ($245 million),” the agency said.

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