Financial Analysis of Steris Corporation: Debt and Share Price Analysis

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FINANCE
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Table of Contents
Introduction......................................................................................................................................3
Bond Analysis..................................................................................................................................3
Ratings Rationale.............................................................................................................................4
Share Price Analysis........................................................................................................................5
Conclusion.......................................................................................................................................6
Reference.........................................................................................................................................8
Appendix..........................................................................................................................................9

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Introduction
Steris Plc headquartered in the United Kingdom founded in the year 1985 provides
innovative life care, health care and various other science products for providing better health
care solutions. Steris Health Care is listed in the New York Stock Exchange with its ticker
symbol “STE”. The current share price of the company is around US$ 122.38. The company is
having long-term debts in the books of accounts in the form of senior notes and Bonds (Roberts
et al. 2014). The share price analysis of the Steris Corporation was done for the five-year trend
and the analysis of the same was done by incorporating the factors supporting the movement of
the same.
Bond Analysis
The Steris Corporation Debt were analysed by the Moody’s Investors Service where the
company include B2 Corporate Family Ratings, B2- Probability of Default Rating Bonds, 475
million Senior Secured Notes Payable in the year 2018. The credit rating of the company in the
year 2011 has remained unchanged for the company following private placement of $95 million
of Senior Holdco PIK notes, which is due, and payable in the year 2019 (remains unrated for the
company bond). The company also borrowed some additional debt, which was used for funding
the distribution that was done to the shareholders of the company. Moody’s Credit Rating
Agency gave a negative review for the company issuance of additional debt, which it borrowed
as the total outstanding debt of the company increased consistently for the company (Nikolov,
Schmid & Steri, 2018). However, the company rating had remained unchanged. The 475 Million
senior secured notes is payable in the year 2018 which was changed to B2 (LGD 3, 46%) from
B2 (LGD 4, 54%). The following rates were done for the company bond in the year 2015:

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 Corporate Family Rating of B2;
 Probability of Default Rating of B2-PD;
 Senior Secured Credit Facilities of B2, LGD3
 $475 million Senior Secured Notes due 2018 of B2, LGD 3
The above review was done by the Moody Investor services after reviewing the
announcement done by the Sterigenics claiming that affiliates of Warburg Pincus will be
recapitalizing the Steriginics Company. The recapitalization plan is seen as an increase in
the financial leverage of the company regarding the volatile capital structure that the
company will be facing.
Ratings Rationale
The B2 Corporate Family rating which has been downgraded due to the modest scale of
Sterigenics and business concentration in the sterilization contracting services done by the
company. Processing of various Medical Isotypes and at the same time there are significant
supplier of the products and services and concentration of small group of consumer’s increases
the business risk of the company. The overall risk of the company is assessed to be higher with
the increasing business and financial risk of the company in the form of increasing debt of the
company. The Credit Rating Agency company expects that the Debt/EBITDA for the company
to be around 5.0x-6.0x for the company in the next 12-18 months.
However, the company is also having various other senior notes, which were reported by
the company in financial report of the company. On February 27 2017, the company sold various
senior notes in a private placement to certain instructional investors (Vogel, 2014).