Moody's downgrades MediMedia

Moody's Investors Service said it downgraded MediMedia USA, Inc.'s corporate family rating to Caa1 from B3 and probability of default rating to Caa1-PD from B3-PD and affirmed the B2 (LGD2) rating on the first-lien credit facility and the Caa2 (LGD5) rating on the $100 million second-lien facility. The outlook remains negative.

The agency said the downgrade reflects expectations of weak performance at the company's StayWell division, which will be the only division in the credit group following the sale of its pharma solutions division. The sale proceeds were used to pay down the first-lien term loan and reduced leverage from 6.4 times to 6.1 times (including Moody's standard adjustments) as of the fourth quarter of 2014.

MediMedia's Caa1 corporate family rating reflects the company's high leverage level, low interest coverage ratio, negative free cash flow and the small size of the company, Moody’s said.

The outlook is negative due to the agency’s expectation for a decline in revenue and EBITDA in 2015 that will lead to an increase in leverage to the 6.5 times range (as calculated by Moody's), which heightens the risk of a covenant violation.

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