S&P puts MKS Instruments on watch

S&P said it placed the BB+ ratings for MKS Instruments Inc. and its senior secured debt on CreditWatch with negative implications.

The CreditWatch placement follows MKS’ announcement on Tuesday that made a cash and stock offer for Coherent Inc., the agency said. The cash portion of the offer amounts to about $2.8 billion, with the rest paid in MKS’ equity.

“If Coherent accepts MKS Instruments’ offer, we estimate S&P Global Ratings’ adjusted net leverage would increase from under 1x to about 4x (without accounting for any synergies from the transaction) based on expected results through December 2020, which is above our current downside leverage threshold of 2x,” the agency said in a press release.

S&P said it would resolve the CreditWatch placement if MKS Instruments’ offer is accepted and when the transaction closes, after reviewing the strategic rationale of the deal, integration plan, balance sheet management, and appetite for more acquisitions with management.

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