Vizient Inc.'s $300 Million Unsecured Notes Assigned 'B' Rating (Recovery: '6')

New York (S&P Global Ratings) April 17, 2019--S&P Global Ratings today assigned its 'B' issue-level rating and '6' recovery rating to Vizient Inc.'s proposed $300 million unsecured notes. The '6' recovery rating indicates our expectation for negligible recovery (0%-10%; rounded estimate: 0%) in the event of a payment default. Vizient intends to use the proceeds from the notes and the new credit facilities to refinance its existing debt, including the existing unsecured notes.
Our 'BB-' issuer credit rating on Vizient reflects our expectation that the company will pursue its acquisition strategy but keep leverage below 4.5x. The company's growth and debt reduction have enabled it to reduce leverage to about 3.7x from about 4.4x from 2017 to 2018. Its ample cash flow enables both actual debt repayment and the capacity to fund modest acquisition activity. We believe the company will generate more than $200 million in discretionary cash flow, which the company will use for tuck-in acquisitions.
The rating also reflects Vizient's specialized focused, but leading position as the largest group purchasing organization (GPO) serving acute care hospitals in the U.S. Vizient's size is a competitive advantage because it can drive higher volume discounts for members, which are under increasing cost pressure because of reimbursement and mature volume trends, making Vizient's sourcing and analytics services increasingly important.
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