Mirion Technologies Inc. Outlook Revised To Negative On Elevated Ratings Affirmed

Stocks and Financial Services Press Releases Wednesday January 27, 2016 09:22
NEW YORK--27 Jan--Standard & Poor's

NEW YORK (Standard & Poor's) Jan. 26, 2016--Standard & Poor's Ratings Servicessaid today that it has revised its outlook on San Ramon, Calif.-based MirionTechnologies Inc. to negative from stable and affirmed its 'B' corporatecredit rating on the company.

At the same time, we affirmed our 'B' issue-level rating on MirionTechnologies (Finance) LLC and Mirion Technologies Inc.'s first-lien creditfacility. The '3' recovery rating remains unchanged, indicating ourexpectation of meaningful (50%-70%; lower half of the range) recovery in theevent of a payment default.

We also affirmed our 'B-' issue-level rating on the company's $65 millionsecond-lien term loan. The '5' recovery rating is unchanged, indicating ourexpectation of modest (10%-30%; lower half of the range) recovery in the eventof a payment default.

"The affirmation reflects our view that Mirion's leading position in the nicheradiation detection, monitoring, and services market, coupled with thecompany's long-term revenue visibility, will enable it to restore its creditmeasures to levels that support our current rating by 2017," said Standard &

Poor's credit analyst Tyrell Peebles. The negative outlook indicates thepotential that we could lower our rating on the company if its credit measuresdo not improve as we forecast in 2016--suggesting that it will be even moredifficult for Mirion to restore its credit measures in 2017. We now expect

that the company's debt-to-EBITDA ratio, which currently exceeds 6.5x(excluding the impact of the FX headwinds), will remain above 6x through 2017.The company's current leverage levels highlight the risk that it faces fromits high seasonality and the potential project deferrals that are typical inthe nuclear power end market, which accounted for approximately 70% ofMirion's 2015 revenue. Furthermore, we expect the company to generate slightlynegative free cash flow in 2016 because of our increased capital expenditure(Capex) estimates, which are in line with management's guidance.

The negative outlook on Mirion Technologies reflects that in our last reviewwe stated that we would consider downgrading the company if its adjusteddebt-to-EBITDA ratio exceeded 6x for an extended period. We estimate thatMirion's fiscal-year 2015 adjusted debt-to-EBITDA metric was around 7x(approximately 6.5x on a currency neutral basis). Although we expect thecompany to reduce its leverage to around 6x by fiscal-year 2017, any deviationfrom our forecasted revenue growth may result in sustained leverage above6.5x.

We could lower our ratings on Mirion if a weak operating performance, mostlikely driven by steady or increasing project deferrals, causes its creditmeasures to remain at their current levels or deteriorate further,specifically if we expect the company's leverage to exceed 7x for an extendedperiod.

We could revise our outlook on Mirion to stable if we begin to see thecompany's operating performance and credit metrics improve, likely due topreviously deferred projects moving forward, which is consistent with ourforecast.


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