Moody’s rates Cosmo facilities Ba3, B3

Moody's Investors Service said it assigned a B3 corporate family rating and B3 probability of default rating to Cosmo Acquisition Corp.

Cosmo Acquisition will acquire Covenant Surgical Partners, Inc., which will become the borrowing entity at which all Moody's ratings will be placed.

The agency also assigned a Ba3 (LGD 1) rating to the company's $25 million senior secured revolving credit facility.

In addition, Moody’s assigned B3 (LGD 4) ratings to Cosmo's $150 million secured subordinated term loan and $45 million secured subordinated delayed-draw term loan.

The outlook is stable.

Proceeds from these transactions will help fund Covenant Surgical's acquisition by private equity firm KKR. Pro forma for the transaction, adjusted debt to EBITDA is about 5.4 times.

Moody’s said the Ba3 rating on the secured revolving credit facility reflects its first priority claim to asset sale proceeds in the event of a default, and the cushion provided by a large amount of junior debt.

The secured term loans are legally subordinated to the revolving credit facility in the event of a default. However, they are rated B3, the same level as the corporate family rating, as they represent the preponderance of debt in the capital structure, the agency explained.

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