Moody's rates Golden State loans B2, Caa2

Moody's Investors Service said it assigned a B3 corporate family rating to Golden State Buyer, Inc., along with a B3-PD probability of default rating.

The borrowing entity is Golden State Medical Supply, Inc.

Moody's also said it assigned a B2 (LGD 3) rating to the $300 million first-lien secured term loan and $40 million secured revolver, and a Caa2 (LGD 5) rating to the $130 million second-lien secured term loan.

The outlook is stable.

Golden State is being acquired in a leverage buyout transaction by Court Square Capital Partners, Moody's said.

The proceeds from the debt raise will be used in connection with equity from the sponsors to fund the acquisition and repay existing debt, the agency said.

The ratings reflect Golden State's elevated financial leverage in light of high customer concentration with the U.S. Department of Veteran's Affairs and the Department of Defense, which account for all of its revenues, Moody's said.

Golden State's supplier concentration is high with nearly 60% of its drugs supplied by three generic drug manufacturers, the agency said.

In order to grow earnings, Golden State must compete for new and existing government contracts, Moody's said, and expand the share of generic drugs that manufacturers sell to the government through resellers.

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