S&P rates Mallinckrodt notes BB-

Standard & Poor’s said it assigned a BB- rating to the proposed $750 million of senior unsecured notes co-issued by Mallinckrodt International Finance SA and Mallinckrodt CB LLC, guaranteed by parent, Mallinckrodt plc.

The proceeds will be used to partly fund the parent company’s acquisition purchase of Therakos Inc.

The recovery rating is 4, reflecting 30% to 50% expected default recovery.

The BB- ratings and 4 recovery ratings on the company’s notes are unchanged, including its $900 million 5¾% senior unsecured notes due August 2022, $700 million 4 7/8% senior unsecured notes due April 2020 and $700 million 5½% senior unsecured notes due April 2025.

The B rating and 6 recovery rating on the company’s $300 million 3½% senior unsecured notes due April 2018 and $600 million 4¾% senior unsecured notes due April 2023 also are unchanged.

S&P said the BB+ rating and 1 recovery rating on Mallinckrodt’s senior secured debt also are unchanged after the company increased the size of its secured revolving credit facility to $500 million.

The company’s corporate credit rating is BB- and the outlook is negative.

The ratings reflect an expectation that the company will sustain leverage between 4x and 5x over the longer term, despite a higher acquisition-related level of leverage over the next year, the agency said.

The ratings also consider its relatively small size, weak late-stage pipeline within its branded segment, ongoing pricing pressures and below-average profitability compared with peers, S&P said.

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