S&P assigns ICU Medical, loan BB

S&P said it assigned BB ratings to ICU Medical Inc. and its planned $850 million term loan. The loan’s recovery rating is 3, indicating expectations for meaningful recovery (50%-70%; rounded estimate: 60%) in default.

“Our rating reflects the company's therapeutic concentration in IV therapy products and below-average EBITDA margin (average EBITDA margins for medical device companies are about 22%-35%), partially offset by its strong position in IV consumables,” S&P said in a press release.

ICU plans to buy Smiths Group plc's medical division for about $2.35 billion. ICU will fund the deal with a new $500 million revolver, undrawn at closing, not rated, an unrated $850 million term loan A, an $850 million term loan B, $500 million of ICU common equity and about $250 million of balance sheet cash.

The outlook is stable. “We expect this, along with improving EBITDA margins, to enable the company to maintain leverage in the 3x-4x range in 2022-2023 and start generating positive free cash flows in 2023, while pursuing its business development strategy and integration of Smiths' medical division,” S&P said.

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