Moody’s lifts Acelity, revises note ratings

Moody's Investors Service said it upgraded Acelity LP, Inc.'s corporate family rating to B2 from B3, probability of default rating to B2-PD from B3-PD and senior secured third-lien notes to Caa1 from Caa2.

Concurrently, the agency affirmed the B1 ratings on the company’s new senior secured bank revolving credit facility and term loans.

Moody's also downgraded Acelity's senior secured first-lien notes to B1 from Ba3.

Lastly, it withdrew all ratings on debt instruments not part of Acelity's new capital structure.

The outlook on all remaining ratings is stable.

Moody’s said the upgrade of the corporate family rating reflects a substantial reduction in Acelity's financial leverage and interest expense burden following the recent divestiture.

The downgrade of the first-lien notes is due to the significant loss of cushion provided by more junior debt in the new capital structure following that junior debt's repayment.

Proceeds from the new senior secured credit facilities and divestiture of Acelity's LifeCell business were together used to refinance and repay existing debt, pay transaction fees, and fund a $100 million special dividend. Acelity's $2.9 billion sale of LifeCell to Allergan, Inc. (Baa3 stable) was completed on Feb. 1.

"Acelity's sale of LifeCell along with the recent refinancing results in a substantial deleveraging that will more than offset the loss of scale and business diversification," Moody's vice president, senior analyst Jonathan Kanarek said in a news release.

The agency estimates that Acelity's pro forma adjusted debt to EBITDA will decline to 5.6 times from 7.4 times.

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