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Moody's downgrades Owens & Minor
Moody's Investors Service said it downgraded Owens & Minor, Inc.'s corporate family rating to B2 from B1 and probability of default rating to B2-PD from B1-PD.
Moody's also said it downgraded the ratings on its $275 million senior secured notes due 2021 to B2 (LGD 3) from B1 (LGD 3) and $275 million guaranteed senior secured notes due 2024 to B2 (LGD 3) from B1 (LGD 3).
The agency also said it downgraded Owens & Minor Medical, Inc.'s $400 million secured revolving credit facility due in 2022 to B2 (LGD 3) from B1 (LGD 3), $250 million secured term loan A-1 due 2022 to B2 (LGD 3) from B1 (LGD 3), $195.8 million guaranteed secured term loan A-2 due 2022 to B2 (LGD 3) from B1 (LGD 3) and $500 million guaranteed secured term loan B due 2025 to B2 (LGD 3) from B1 (LGD 3).
This concludes a review for downgrade that began in February, the agency said.
Moody's also said it affirmed the SGL-3 speculative grade liquidity rating, signifying adequate liquidity.
The outlook is stable.
The downgrades reflect weakening operating performance due to pricing and wage pressure, challenges in integrating two large acquisitions and service issues in its core distribution network, Moody's said.
As a result, Owens & Minor has not reduced its leverage as anticipated, the agency said.
The downgrades reflect a view that adjusted debt-to-EBITDA ratio will remain at higher than 5x over the next 12- to 24-months, Moody's said.
The ratings reflect the company's moderate scale in the medical distribution business, the agency said.
The company has low profit margins, illustrating the challenges it faces due to pricing and margin pressure from both its customers and suppliers, Moody's said.
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