S&P: rates CMED’s $150M convertible bond B+

(The following was released by the rating agency)

Dec. 23, 2010–Standard & Poor’s Ratings Services said
today that it had assigned its ‘B+’ issue rating to the US$150
million convertible bond due 2016 issued by China Medical
Technologies Inc. (CMED; B+/Stable/–). The fixed-rate bond
has a 6.25% coupon. The company aims to use the majority of
the net proceeds for refinancing.

Bondholders will have a put option if a “change of
control” or “termination of trading” occurs. The bond may be
converted into shares at an initial conversion price of
US$14.57 per share. CMED also has the option to redeem the
bond beginning Dec. 15, 2013, prior to the final maturity date
(Dec. 15, 2016).

In our view, CMED had completed its near-term refinancing
needs, improved its debt maturity profile, and increased its
financial flexibility. This month, CMED has used a substantial
amount of the net proceeds of its recent bond issue to
repurchase its outstanding convertible bond due 2011, which
has a remaining principal amount of US$29.1 million. CMED also
has a convertible bond due 2013 with remaining principal of
US$248 million. The company’s operating performance was
satisfactory in the first half of 2010, in our opinion. We
expect its financial metrics to gradually improve as it
expands its revenue base and reduces debt.

The rating on CMED reflects the company’s small scale
compared with global peers’, its highly leveraged financial
risk profile, and high industry risks. These weaknesses are
tempered by the company’s good profitability, recurring cash
flow generation, and good niche market position. In addition,
we believe China’s healthcare industry has favorable growth
potential, given its low penetration rate.

S&P: rates CMED’s $150M convertible bond B+