S&P downgrades Molnlycke

S&P said it lowered Molnlycke Holding AB’s long-term corporate credit rating to BBB-from BBB and its short-term corporate credit rating to A-3 from A-2.

The outlook is stable.

S&P also said it lowered the long-term issue ratings on Molnlycke's senior unsecured debt to BBB- from BBB.

The downgrade reflects an understanding that the company may increase returns to its shareholder, Investor AB, by more than initially factored into the previous base-case scenario, the agency said.

These cash outflows will materially increase Molnlycke's debt leverage to credit metrics no longer compatible with a BBB rating, S&P said.

The agency said the company’s adjusted debt-to-EBITDA ratio will increase to 3x to 3.5x and remain in this range over the next 12- to 24-months.

Molnlycke's financial profile is supported by its ability to generate strong free operating cash flow despite high capital expenditure of about €100 million per year over this period, S&P said.

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