Dade Behring's new $575 million senior secured credit facility has received a preliminary B+ rating from Standard & Poor's, with the recovery value of the loan expected to be greater than 50% if the company was sold in a simulated bankruptcy scenario. The company recently negotiated a pre-packaged bankruptcy plan and will cut its debt by some $700 million to roughly $800 million, reducing its debt-to-EBITDA ratio to three times.
The new credit facility comprises a five-year, $125 million revolver and a six-year, $450 million term loan, which replaces the company's former $1.2 billion line. The amortization schedule for the new facility is more manageable than the previous credit, and Dade Behring will not face any debt maturities until 2007.
The credit is backed by a first-priority perfected security interest in all stock, equity interest and inter-company promissory notes and substantially all other tangible and intangible assets, with exceptions still to be determined. S&P assigned the rating with expectations that the exceptions will not be material, said Michael Kaplan, analyst.
S&P is concerned about market reaction to the company in its post-bankruptcy period, as competitors look to take advantage of the fears of Dade's customers. These concerns, however, are mitigated by the company's leading business position, its comprehensive product offerings and a relatively predictable revenue stream. "Our customers have been extremely supportive both prior to the filing and during the process," a company spokesman said.
Moody's Investors Service, meanwhile, has assigned its corresponding B1 rating to Dade Behring's new deal. That rating reflects the company's moderately high leverage, modest interest coverage, historically weak cash flow and the questionable impact of the bankruptcy on the company's operations.