S&P assigns BB+ to Mallinckrodt loan

S&P said it assigned its BB+ issue-level rating to the proposed $500 million senior secured term loan co-issued by Mallinckrodt International Finance SA and Mallinckrodt CB LLC and guaranteed by parent Mallinckrodt plc.

Proceeds will be used to partly fund parent Mallinckrodt plc’s purchase of Sucampo Pharmaceuticals Inc. The recovery rating on the term loan is 1, reflecting an expectation of very high (90%-100%; rounded estimate: 95%) recovery in the event of payment default.

The issue-level ratings and recovery ratings on Mallinckrodt's senior unsecured debt are unchanged at BB- and 4, respectively. The recovery rating of 4 reflects an expectation of average (30%-50%; rounded estimate: 30%) recovery in the event of payment default.

Additionally, the issue-level rating and recovery ratings on Mallinckrodt's structurally subordinated debt are unchanged at B and 6, respectively. The recovery rating of 6 reflects an expectation of negligible (0%-10%; rounded estimate: 0%) recovery in the event of payment default.

The corporate credit rating on Mallinckrodt is BB-, and the outlook is negative. The BB- corporate credit rating reflects an expectation that, after the initial spike to 5x following the Sucampo acquisition, the company's leverage ratio will improve to below 5x in the first half of 2019, S&P said in a news release.

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