S&P slices Carestream Health

S&P said it lowered Carestream Health Inc.’s to CC from B- and placed it on CreditWatch with negative implications. The agency also cut the second-lien issue-level rating to CC from CCC+ and placed the B- first-lien issue-level rating on CreditWatch with negative implications.

Carestream reported a recapitalization agreement in which it will eliminate about $220 million of debt with a debt for equity exchange. The negative actions follow Carestream’s announcement, the agency said.

“As part of the transaction, Carestream's lenders are exchanging debt for the company's common equity and will become the new owners of the company. In our view, the offer implies the creditors will receive less value than what was originally promised by converting debt into a more junior security, without sufficient offsetting compensation,” S&P said in a press release.

The negative CreditWatch placement reflects an expectation the issuer credit rating will be cut to SD (selective default) and the ratings on the affected issues to D if the exchange is completed. “Immediately following completion of the exchange, we would raise the issuer credit rating to a level that reflects the new capital structure and near-term business prospects,” the agency said.

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