S&P lowers Owens & Minor

S&P said it lowered the issuer credit rating on Owens & Minor Inc. to B from BB, along with the rating on its senior secured credit facility and senior secured notes to B.

The recovery rating remains at 3, indicating 50% to 70% expected default recovery.

The outlook remains negative.

The downgrades reflect a belief that Owens & Minor's adjusted leverage will be higher than 5x over the coming years, compared with a previous sub-4x leverage expectation, S&P said.

The agency said it under-appreciated the intense pricing pressure and the resulting EBITDA impact on the business.

S&P said it also sees elevated risk for a covenant breach given the step-down in maximum covenant leverage in the third quarter of 2019, which will limit the company's access to its revolver.

The agency said it expects the company will be able to renegotiate the covenants, but any amendment could cause interest expense to increase substantially.

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