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Rating Action: Moody's revises Numotion's outlook to negative and affirms B2 CFRGlobal Credit Research – 14 Dec 2021New York, December 14, 2021 — Moody's Investors Service ("Moody's") today revised NMN Holdings III Corp. ("Numotion") outlook from stable to negative. Moody's also affirmed all other ratings including the B2 Corporate Family Rating, the B2-PD Probability of Default Rating and the B1 first lien credit facilities ratings.The revision in the rating outlook reflects Moody's expectations that Numotion's leverage will likely remain elevated for an extended period. Moody's estimates Numotion's net debt to EBITDA is currently approaching 8 times (excluding CARES grants). Numotion continues to see strong order demand given the essential nature of its products to its clients and Moody's believes the company is likely gaining market share. However the company has seen some supply chain challenges converting the orders to revenue due to delays in obtaining critical components. Revenues have also been pressured to some degree by churn in its employee base notably its Assistive Technology Professionals (ATP).The affirmation of the ratings reflects Moody's expectations that the company will over the course of 2022 see a return to profitable growth such that leverage will improve toward six times over this period. The affirmation also reflects Numotion's very good liquidity profile with approximately $27 million of cash on hand and full access to its $50 million revolving credit facility. Outside of its revolver, the company has no debt maturities until 2025.The following rating actions were takenAffirmations:..Issuer: NMN Holdings III Corp….. Corporate Family Rating, Affirmed B2…. Probability of Default Rating, Affirmed B2-PD….Gtd. Senior Secured 1st Lien Bank Credit Facility, Affirmed B1 (LGD3)Outlook Actions:..Issuer: NMN Holdings III Corp…..Outlook, Changed To Negative From StableRATING RATIONALENumotion's B2 CFR reflects its narrow business profile as a provider of complex wheelchairs and related accessories to adult and pediatric end-users with permanent ambulatory disabilities. The rating also reflects Numotion's high financial leverage with gross debt/EBITDA approaching 8 times as of September 30, 2021. While underlying demand remains solid, the company has experienced supply chain challenges which have limited its deliveries and revenues. The company's ratings benefit from its position as a leader in its markets. The company has the largest network of skilled assistive technology professionals which is a competitive advantage. Numotion benefits from a very good liquidity profile with $27 million in cash and full access to its $50 million revolving credit facility. Moody's expects the company will maintain positive free cash flow, though there may be some variability in working capital due to supply chain challenges. The rating also reflects Moody's expectations that financial policies will remain aggressive as the company is owned by a private equity sponsor.The negative outlook reflects the risks that leverage may remain elevated if supply chain disruptions continue for an extended period of time and/or become more challenging.ESG factors are a consideration in Numotion's ratings. The company has somewhat higher exposure to demographic and social risks as it is compensated directly by Medicare and Medicaid, which represent 24% and 11%, respectively, of 2020 revenue. The company has somewhat less pricing risk as the significant majority of the company's products are exempt from competitive bidding requirements for durable medical equipment. Any amendment to this treatment would require an act of Congress, not a decision by CMS. From a governance perspective, Numotion faces elevated risk around capital allocation given its ownership by funds affiliated with private equity sponsor AEA.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSRatings could be upgraded if the company were to maintain a leading market share with a good organic growth profile. Financial policies would also need to be balanced. Quantitatively ratings could be upgraded if debt/EBITDA was sustained below 5 times.Ratings could be downgraded if the company were to see continued pressure on sales and operating margins as a result of supply chain challenges. Ratings could also be downgraded if the company does not maintain good liquidity especially while leverage remains elevated. Quantitatively ratings could be downgraded if debt/EBITDA was sustained above 6.25 times for an extended period.NMN Holdings III Corp. ("Numotion") is a leading provider of complex rehabilitation technology mobility solutions in the US. These include complex wheelchairs and related products and accessories to adult and pediatric end users with permanent ambulatory disabilities. Revenue exceeds $0.6 billion. The company is owned by affiliates of AEA Investors LP and coinvestors. The company is privately held with limited financial data publicly available.The principal methodology used in these ratings was Medical Products and Devices published in October 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1278812. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Scott Tuhy Senior Vice President Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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