S&P downgrades Fenwal

Standard & Poor's said it lowered its ratings on Fenwal Inc. The corporate credit rating was lowered to B from B+.

The outlook is stable.

The agency said the downgrade primarily reflects the risk and complexity associated with the transition to becoming an independent company from former parent Baxter International Inc. and the subsequent higher-than-expected transition costs that have resulted in negative free cash flow. In addition, S&P expects debt leverage to remain aggressive because the company will likely use its delayed-draw term loan to fund remaining transition-related capital spending projects.

The B rating on Fenwal reflects the necessity of retaining and capturing manual red blood cell collection customers as the business shifts to automated blood collection, as well as customer concentration and pricing pressures, S&P said.

These risks are partly offset by the stable global demand for blood collection, the company's leadership position in manual red blood cell collection and a high proportion of revenues derived from disposable products, the agency said.

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