Research Update: Lab Group Synlab (Ephios Subco 3) Rated 'B' After Equity-Sponsor's Takeover Transaction; Outlook Stable

Cinven, through Ephios Subco 3, has secured close to 85% of Synlab AG's outstanding shares and plans to repay the existing term loan A (TLA) and term loan B4 (TLB4). To fund the transaction, the company will raise a new term loan B (TLB) and senior secured notes totaling about €1.45 billion, together with preplaced payment-in-kind (PIK) debt of €500 million, and cash on the balance sheet. It will also secure a new €500 million revolving credit facility (RCF). We anticipate lower EBITDA margins in the next two years and a normalization in growth trends that, together with a higher total debt quantum, will push leverage above 6x. We therefore assigned our 'B' long-term issuer credit rating to the new

...- Cinven, through Ephios Subco 3, has secured close to 85% of Synlab AG's outstanding shares and plans to repay the existing term loan A (TLA) and term loan B4 (TLB4). - To fund the transaction, the company will raise a new term loan B (TLB) and senior secured notes totaling about 1.45 billion, together with preplaced payment-in-kind (PIK) debt of 500 million, and cash on the balance sheet. It will also secure a new 500 million revolving credit facility (RCF). - We anticipate lower EBITDA margins in the next two years and a normalization in growth trends that, together with a higher total debt quantum, will push leverage above 6x. - We therefore assigned our 'B' long-term issuer credit rating to the new group's parent company Ephios Subco 3, our 'B+' issue rating and '2' (70%) recovery rating to the new proposed TLB and senior secured notes. - The stable outlook reflects our view that Synlab will continue to increase its profitability driven by organic growth, a successful portfolio optimization...

Research Update