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TEXT-S&P rates Biomet proposed senior notes 'B-'
July 25, 2012 / 7:14 PM / 5 years ago

TEXT-S&P rates Biomet proposed senior notes 'B-'

 (The following statement was released by the rating agency)
 July 25 - Standard & Poor's Ratings Services said today that it assigned its
'B-' issue-level and '6' recovery ratings to Warsaw, Ind.-based medical products
manufacturer Biomet Inc.'s proposed $550 million senior unsecured notes maturing
2020. The recovery rating reflects our expectation for negligible recovery (0 to
10%) in the event of default. The notes will rank equally with the company's
existing and future senior unsecured indebtedness. We expect notes offering
proceeds to fund the purchase of the company's senior toggle notes in a tender
offer. We expect the offering will not meaningfully alter Biomet's outstanding
debt or credit metrics, which 
include pro forma total adjusted debt to EBITDA of roughly 6x as of May 31, 
2012. We expect debt leverage to remain consistent with the company's 'highly 
leveraged' financial risk profile (partially defined as adjusted debt to 
EBITDA of more than 5x).

The ratings on Biomet Inc. reflect its "satisfactory" business risk profile 
and "highly leveraged" financial risk profile, according to our criteria. 
Biomet's satisfactory business risk profile reflects its somewhat narrow focus 
in orthopedic products and pricing pressure, as well as the relatively stable 
nature of the orthopedic products industry, Biomet's relatively full product 
offering, and favorable long-term volume trends. The financial risk profile 
and corporate credit rating overwhelmingly reflect our expectation for minimal 
debt reduction: Our fiscal 2013 forecast for adjusted funds from operations 
(FFO) to total debt is between 5% and 10%, well within the less-than-12% 
guideline for a highly leveraged financial risk profile. We believe this key 
debt protection measure will not improve, because we expect modest revenue 
growth in fiscal 2013 and pricing pressure, constraining EBITDA expansion and 
significant improvements in cash flow. We believe debt to EBITDA will remain 
well above the 5x threshold for a highly leverage financial risk profile.

Fiscal 2012 revenue growth of 3% in constant currency was consistent with our 
expectations. Constant-currency revenue growth improved to 5% in the May 2012 
quarter, which we believe reflects improved industry growth and some modest 
market-share gains for Biomet, likely related to the launch of new products 
and the near completion of the trend away from metal-on-metal hips. We believe 
revenue growth will remain in the low- to mid-single digits in fiscal 2013, 
consistent with our expectations for the industry and about twice the rate of 
GDP growth. We believe EBITDA margins, including our usual adjustments, could 
remain relatively flat (excluding the impact of the Affordable Care Act 2.3% 
medical device tax), despite ongoing pricing pressures. We expect debt 
leverage to remain relatively flat in fiscal 2013.

(For the complete corporate credit rating rationale, see the research update 
on Biomet Inc., published July 25, 2012, on RatingsDirect on the Global Credit 
Portal.)

RELATED CRITERIA AND RESEARCH
  -- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
  -- Business Risk/Financial Risk Matrix Expanded, May 27, 2009
  -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
  -- 2008 Corporate Criteria: Rating Each Issue, April 15, 2008

RATINGS LIST
Biomet Inc.

Corporate credit rating                 B+/Stable/--

Rating Assigned
$550 mil. sr unsec notes due 2020       B-
 Recovery rating                        6

 (Caryn Trokie, New York Ratings Unit)
 

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