S&P assigns AEC Parent, loans B-

S&P said it assigned B- ratings to AEC Parent Holdings Inc. (Advancing Eyecare) and its new $340 million first-lien credit facility. The facility is comprised of a $40 million revolving credit facility, a $250 million first-lien term loan B, and a $50 million first-lien delayed draw term loan. The recovery ratings on the loans are 3. The outlook is stable.

“Our rating reflects AEC's small scale and narrow operating focus in the ophthalmic products and services industry, which is partially offset by its leading market position in ophthalmic distribution in the U.S. We view the industry as fragmented, but it contains larger competitors. Although AEC maintains a leading position as one of the largest distributors in the U.S. for ophthalmic instruments, the small size of its core addressable market (estimated at $2.3 billion) constrains the rating. AEC competes with larger companies, including Zeiss, EssilorLuxottica, and Alcon,” S&P said in a press release.

However, the agency noted the company has a diversified customer base and distributes both third-party products and proprietary products to private practices (optometrists and ophthalmologists), national retailers, hospitals, governments and schools.

The stable outlook reflects a forecast for steady revenue growth and modest cash flow generation over the projection period. “We also expect leverage to remain between 6x-7x,” S&P said.

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