Moody's lowers Owens & Minor, rates loan B1

Moody's Investors Service said it downgraded Owens & Minor, Inc.'s corporate family rating to B1 from Ba1 and its probability of default rating to B1-PD from Ba1-PD.

The outlook is stable.

Moody's also said it assigned B1 (LGD 3) ratings to the revolving credit facility, term loan A, proposed $196 million term loan A-2 and proposed $500 million term loan B at the company's subsidiary level.

The proceeds will be used to acquire the surgical and infection prevention business from Halyard Health for $710 million and pay $40 million in transaction fees and expenses, the agency explained.

Upon completion of this transaction, all of Owens & Minor's existing bank debt and existing notes will become secured, Moody's said.

The new term loan A-2 and term loan B will also be secured, the agency said, and all funded debt in the capital structure will be pari passu.

The downgrades reflect the significant increase in financial leverage as a result of the $710 million debt-funded acquisition of the business and the Byram Healthcare acquisition in the third quarter of 2017, the agency said.

As a result of significantly increased debt, the company's pro forma adjusted debt-to-EBITDA ratio will rise to about 5.4x after the close of the acquisition, Moody's said.

The company's leverage was around 2.4x at the end of 2016, the agency said.

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