Moody’s drops Sterigenics-Nordion, rates notes Caa2

Moody's Investors Service downgraded Sterigenics-Nordion Holdings, LLC’s corporate family rating and probability of default rating by one notch to B3 and B3-PD, respectively.

The outlook was revised to stable from negative.

The agency also assigned a Caa2 rating to Sterigenics-Nordion Topco, LLC's new $350 million holdco PIK toggle notes.

Proceeds from this issuance will be used to complete a $340 million dividend recapitalization and to pay transaction fees and expenses.

At the same time, Moody's affirmed the B1 ratings on Sterigenics' senior secured credit facilities and the Caa1 rating on its existing senior unsecured notes.

The B3 corporate family rating is constrained by Sterigenics' very high financial leverage, the agency explained. Pro forma for the dividend recapitalization and recent acquisitions, Moody's projects adjusted debt to EBITDA to be about 8 times.

Moody's expects free cash flow of roughly $40-60 million annually during 2017 and 2018, enabling Sterigenics to reduce its adjusted leverage toward 7 times over that time horizon.

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