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Investing.com -- S&P Global Ratings has upgraded its issue-level rating on Integer Holdings (NYSE:ITGR) Corp. subsidiary Greatbatch Ltd.’s senior secured debt to ’BB’ from ’BB-’, and revised the recovery rating to ’2’ from ’3’. The ’2’ recovery rating suggests a substantial recovery expectation of between 70%-90% in the event of a payment default, with a rounded estimate of 85%.
The rating action came after the completion of the company’s $1 billion convertible notes issuance. The proceeds from this issuance will be used to exchange a portion of its $500 million convertible notes, repay a portion of its term loan A, and outstanding borrowings under its revolving credit facility, and pay related fees and expenses. This transaction is largely leverage-neutral.
The credit metrics for Integer, a medical device contract manufacturer based in Plano, Texas, are not materially affected by this transaction, leaving the ’BB-’ issuer credit rating and stable outlook unchanged. The transaction is viewed favorably as it reduces interest expense and enhances liquidity with increased revolver capacity. The upgrade of the senior secured debt at Greatbatch reflects a decrease in secured debt and a higher gross default valuation of the company by about $200 million.
The simulated default scenario, which considers a potential default in 2029 due to competitive pressures or reputation issues leading to loss of contracts, was also presented. The scenario assumes a capital structure consisting of an $800 million revolving credit facility maturing in 2028 (85% drawn), $154 million outstanding under its senior secured term loan A due in 2028, $116 million outstanding of unsecured convertible notes due in 2028, and $1 billion outstanding of convertible senior notes due in 2030.
The recovery analysis includes the supplier financing program or receivables factoring of up to $100 million and assumes the accounts receivable program will be fully drawn. The estimated debt claims also include about six months of accrued but unpaid interest outstanding at default. The recovery prospects are based on a distressed gross recovery value of approximately $1.1 billion, with an emergence EBITDA of about $181 million and EBITDA multiple of 6x.
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