Moody’s revises Zimmer to negative

Moody's Investors Service said it affirmed the Baa3 senior unsecured ratings of Zimmer Biomet Holdings, Inc. following news that Zimmer plans to acquire LDR Holding Corp., a maker of spine products, for about $1 billion in cash.

The outlook was changed to negative from stable.

The company expects to largely fund the transaction with revolver borrowings, which it will refinance with about $750 million of new senior unsecured notes after the transaction closes.

"Incremental debt incurred to fund the LDR acquisition, combined with share buybacks executed earlier this year, will eliminate any cushion that Zimmer has in achieving its leverage targets," Moody's senior credit officer Diana Lee said in a news release.

"Zimmer was already behind on deleveraging post-Biomet because of weaker than anticipated operating performance and the negative effects from a strong dollar."

If the company does not get back on track with steadily reducing financial leverage, Moody's said it could downgrade Zimmer's ratings.

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