Moody’s rates Drive DeVilbiss Caa1; loans Caa1, Caa3

Moody's Investors Service said it assigned a Caa1 corporate family rating and a Caa1-PD probability of default rating to CD&R Reign Merger Sub, Inc., which conducts business as Drive DeVilbiss Healthcare.

The agency also assigned Caa1 ratings to the company's proposed first-lien senior secured credit facilities, and a Caa3 to a proposed second-lien senior secured term loan.

The outlook is stable.

Proceeds from the loans and a contribution of about $295 million of sponsor equity will be used to fund the acquisition of the company by Clayton, Dubilier & Rice, fund two pending incremental acquisitions, pay transaction fees and expenses and add to cash balances.

Upon closing of the transaction, CD&R Reign Merger Sub will be merged with and into Medical Depot Holdings, Inc., the surviving borrower. At that time, and upon review of final documentation, all issuer and instrument-level ratings will be reflected under Medical Depot Holdings, Inc.

Moody’s said CD&R Reign Merger Sub’s Caa1 corporate family rating reflects its modest cash flow from operations, exposure to customers facing ongoing reimbursement pressures and very high financial leverage. On a pro forma basis for the 12 months ended June 30, 2016, Drive's adjusted debt to EBITDA was in the mid-8-times range.

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