24 Apr Moody’s places Carestream’s ratings on review for downgrade
Rating Action:
Moody’s places Carestream’s ratings on review for downgrade
New York, April 19, 2017 — Moody’s Investors Service, (“Moody’s”) placed Carestream Health, Inc.’s (“Carestream’s”) ratings, including its B2 Corporate Family Rating and B2-PD Probability of Default Rating, under review for downgrade. This follows Carestream’s announcement that it has agreed to divest its dental digital business to funds managed by Clayton, Dubilier & Rice (CD&R), a private investment firm. The dental digital business is among Carestream’s most profitable and high growth segments, accounting for about 20% of sales in 2016.<<See the Rating Action Report HERE>>
Moody’s rating review will consider: (1) use of proceeds including debt repayment; (2) growth prospects for the remaining segments; (3) cash flow and deleveraging capabilities following the divestiture; and (4) the likelihood for additional divestitures.
The following ratings were placed under review for downgrade:
Carestream Health, Inc.:
Corporate Family Rating, B2
Probability of Default Rating, B2-PD
Senior secured revolving credit facility, B1 (LGD 3)
Senior secured first lien term loan, B1 (LGD 3)
Senior secured second lien term loan, Caa1 (LGD5)
RATINGS RATIONALE
Carestream’s B2 CFR (on review for downgrade) reflects its considerable financial leverage. The ratings are also constrained by secular challenges in the company’s traditional film business as customers in developed markets continue to transition away from film and instead adopt digital imaging solutions. Film will account for over half of Carestream’s revenues following this planned divestiture. Further, in the medical digital imaging and healthcare IT businesses, Carestream competes with substantially larger and better capitalized players. The ratings are also constrained by earnings and cash flow volatility created by the company’s sensitivity to commodity prices and foreign exchange, and Carestream’s history of making dividends to its financial sponsor. The ratings are supported by Carestream’s leading market position in film based products, its large revenue base and diversified global operations. The company should benefit from growth in emerging markets, where demand for film-based medical products continues to grow.
Carestream Health, Inc., headquartered in Rochester, New York is a supplier of imaging and IT systems to medical and dental providers as well as broader markets. The company is owned by Toronto-based Onex Corporation (“Onex”) and Onex Partners II LP. For the twelve months ended December 31, 2016, Carestream generated revenues of approximately $2 billion.
The principal methodology used in these ratings was that for the Global Medical Product and Device Industry published in October 2012. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Diana Lee
VP – Senior Credit Officer
Corporate Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Peter H. Abdill, CFA
MD – Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653