S&P rates Ephios Subco 3 notes, loan B+

S&P said it assigned Ephios Subco 3, the new parent company of Synlab AG, a B issuer rating and B+ issue and 2 (70%) recovery ratings to its planned term loan and senior secured notes to total about €1.45 billion. The outlook is stable.

Cinven is acquiring Synlab through Ephios. To fund the deal, it will use the new loan and notes and preplaced payment-in-kind debt of €500 million, and balance sheet cash. It will also obtain a €500 million revolving credit facility.

“Following the acquisition and with the new capital structure in place, we expect Synlab’s S&P Global Ratings-adjusted debt to EBITDA will be 6x-6.5x, with an EBITDA interest coverage ratio of 2x-3x,” the agency said in a press release.

S&P added, “After three very profitable years where the laboratory group benefited from high demand for polymerase chain reaction (PCR) testing and other Covid-19-related contributions, we expect Synlab will experience a steep decline in sales of about 18% and profitability of about 40% versus last year.”

The outlook considers the view that Synlab will keep increasing its profitability driven by organic growth, a successful portfolio optimization plan, and the cost-efficiency program, the agency said.

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