CARY – Standard & Poor's Rating Services called the holding company that owns Sage Products LLC "highly leveraged" and assigned a junk rating to its $380 million debt issue.
Cary-based Sage Products Holdings III LLC got a B rating earlier this month. That means the company is able to meet financial commitments but faces adverse conditions. BBB- is considered the lowest investment grade by market participants, according to the rating agency.
Chicago private equity firm Madison Dearborn Partners LLC bought Sage Products in December for $350 million, Crain's Chicago Business reported.
The below investment grade rating reflects a "highly leveraged" financial risk profile, according to a press release from the ratings agency.
"The rating also incorporates a 'weak' business risk profile, dominated by its relatively narrow medical products focus," the release said.
S&P also cited Sage's 6.5 debt-to-earnings before interest, taxes, depreciation, and amortization ratio. That ratio is expected to remain above 5 through 2015. Generally, a ratio of less than 3 is considered normal.
In another press release late last year, S&P said it expected Sage's revenue to grow.
"We expect the company to expand its revenues through 2013 at a mid- to high-single-digit rate that is about twice the growth we expect in overall health care spending in the U.S., which accounts for the large majority of company revenues," said S&P credit analyst Michael Kaplan.
After being acquired by Madison Dearborn, Sage's former President and Chief Operating Officer Scott Brown became the company’s CEO and vice chairman. Vincent Foglia remains chairman of the board.
Sage said its management team would continue to own a significant portion of the company.
Sage was founded in 1971 and employs more than 700 people in McHenry County.