S&P revises Organon unsecured recovery

S&P said it revised the rounded recovery estimate for Organon & Co.’s unsecured tranche to 20% down from 25%. The revision follows a change to the company’s debt structure the agency said it views as weakening recovery prospects for the unsecured debt.

“We view overall recovery as weaker because the revision lowers debt amortization by about $100 million annually and removes a tranche of debt subject to financial covenants (the term loan A),” S&P said in a press release.

Organon eliminated a $2 billion secured term loan A from consideration, increased the size of the proposed dollar-denominated term loan B by $1 billion and euro-denominated secured and U.S. dollar-denominated unsecured bonds each by $500 million, cut the euro-denominated secured term loan B by $100 million and increased the dollar-denominated secured bonds by $100 million.

“Our BB/stable long-term issuer credit and issue-level ratings are unchanged by the updated debt structure,” S&P said.

The BB rated senior secured tranche has a recovery rating of 3, indicating an expectation for meaningful recovery (50%-70%; rounded estimate: 55%) in default. The BB- rated senior unsecured tranche has a recovery rating of 5, indicating an expectation for modest recovery (10%-30%; rounded estimate: 20%) in default.

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