S&P Rts Sirona's Senior Notes 'B'; Outlook Positive.

LONDON--(BUSINESS WIRE)--Standard & Poor's CreditWire 6/19/98-- Standard & Poor's assigns its single-'B' long-term rating to the DM170 million senior notes issued by Sirona Dental Systems SARL (Sirona). The corporate credit rating is double -'B'-minus. The outlook for both ratings is positive.

Ratings reflect Sirona's position as a leading manufacturer and distributor of dental equipment, including chair units, instruments, X-ray equipment, sterilization units, and restorative equipment. The majority of revenues and earnings come from its home German market, which continues to be an attractive one for dental suppliers, in view of the willingness by dentists to invest, and a long history of dental spending, supported by a high percentage of patient coverage under public health insurance. A diversified operating base enables it to be a full-line supplier to dentists, and its largely company-owned distributor network provides important support for its products as well as the maintenance of close relationships with dentists.

Senior management, installed following the late 1997 purchase by Schroder Ventures of the Siemens AG dental business, must address a high cost structure, a drop in 1997 sales in the aftermath of Siemens' announcement it would sell this unit, plus the likely changes in the patient reimbursement system in its key German market. Plans to cut costs are underway, and will be necessary to enable the company to effectively take part in increasingly competitive global markets, and to address weak operating margins and cash flow coverage of debt. Although pro-forma EBITDA coverage of cash interest is 2.7 times (X), much planned improvement will come from the cost reduction program.

OUTLOOK: Positive. Ratings could be raised should Sirona's record improve EBITDA levels through a combination of the new cost program, or with greater-than-expected revenues growth, perhaps via the performance of its ceramic restoration line. While near term financial flexibility is noteworthy, the ability to address the changing competitive environment in Germany would add further support for a higher rating, Standard & Poor's said.---CreditWire

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