Fitch assigns Ephios B, notes, loan B+

Fitch Ratings said it assigned Ephios Subco 3 Sarl (Synlab) an expected B long-term issuer default rating with a positive outlook. The agency also assigned an expected B+ senior secured rating with an RR3 recovery rating to Synlab's planned senior secured term loan B and senior secured notes of €1.45 billion.

Synlab is the top entity of a new restricted group following the announced takeover by its key shareholder Cinven and the refinancing. The ratings of Synlab AG, the top entity of the former restricted group, remain on rating watch negative and Fitch said it expects to withdraw them on completion of the transaction.

“The 'B(EXP)' IDR reflects Synlab's weakened credit metrics under the new capital structure and a loosening of financial policy with no specified leverage target following Cinven's buyout, as well as the risk of an increase in leverage should the company decide to purchase the remaining 15% minority stake over the rating horizon.,” Fitch said in a press release.

The new senior secured debt, in combination with €500 million of payment-in-kind notes, will be used to pay off debt and to buy tendered shares up to an 85% ownership.

The positive outlook reflects an expectation that Synlab's credit metrics are likely to improve towards upgrade thresholds as margins gradually return to normalized levels over the next 12-18 months, Fitch said.

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