Moody’s rates Arbor Pharmaceuticals loan B1

Moody's Investors Service said it assigned a B1 corporate family rating and B1-PD probability of default rating to Arbor Pharmaceuticals, LLC.

The agency also assigned a B1 rating to the proposed $575 million senior secured bank credit facility.

The outlook is stable.

Proceeds from the term loan, along with cash on hand, will be used to fund the pending acquisition of XenoPort, Inc. for about $467 million.

Moody’s aid the B1 corporate family rating reflects Arbor's small size, both on an absolute basis and relative to larger players in the pharmaceutical industry – with estimated 2015 pro forma revenue of less than $500 million after the acquisition of Xenoport.

The rating is also constrained by the company's revenue concentration in certain legacy products, which the agency anticipates will face increasing generic competition over the next several years.

The rating also reflects the risk that Arbor will not be able to successfully execute on its strategy of growing volumes in its branded portfolio of drugs and launching new drugs in its generic business. Historically, the vast majority of Arbor's growth has been through acquisitions and price increases on its legacy drugs, Moody’s said.

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