Moody's lowers Medical Depot

Moody's Investors Service said it downgraded Medical Depot Holdings, Inc.'s corporate family rating to Caa2 from Caa1.

The company does business as Drive DeVilbiss.

Moody's also downgraded the company's probability of default rating to Caa2-PD from Caa1-PD, first-lien credit facilities to Caa2 (LGD 3) from Caa1 (LGD 3) and second-lien term loan to Ca (LGD 6) from Caa3 (LGD 6).

The outlook is stable.

The downgrade reflects a view that Drive's capital structure is unsustainable absent significant improvement in operating performance, the agency said.

The company's adjusted debt-to-EBITDA ratio exceeded 12x for the 12 months that ended March 31, 2019, Moody's said.

The company's liquidity has weakened given sustained negative free cash flow and increased utilization of its revolving credit facility, the agency said.

The downgrade also reflects the narrowing window for Drive to meaningfully improve performance ahead of the January 2022 expiration of its revolving credit facility and January 2023 maturity of its first-lien term loan, Moody's said.

The ratings reflect the company's high leverage and liquidity that will remained constrained as cash flow will remain pressured for the next couple of quarters, the agency said.

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