S&P cuts Emergent BioSolutions

S&P said it lowered its ratings for Emergent BioSolutions Inc. to CCC+ from B- and its senior unsecured notes to CCC from CCC+ and placed its ratings on CreditWatch with negative implications.

“Emergent announced it has entered a forbearance agreement with its secured lenders. The agreement ensures that an event of default cannot be triggered before April 30, protecting Emergent from a likely financial covenant breach on March 31, 2024. It also protects the company against a default from the inability to raise $75 million of capital, as is required by the amended credit agreement.” S&P said in a press release.

The agency noted it does not consider the forbearance the equivalent of default because the company is not planning to miss or defer any interest payments during this time. Lenders will get a 50 basis point interest rate increase in compensation for the agreement, which S&P said it understands is meant to buy time for Emergent to continue to recover as it negotiates with lenders in advance of 2025 maturities.

S&P said it plans to resolve the CreditWatch placement once it has clarity on the company's capital structure strategy following the April 30 expiration. Another downgrade is likely unless Emergent appears able to refinance or extend its secured credit facility before it goes current in May.

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