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Moody’s cuts Endo, rates facilities Ba2
Moody's Investors Service said it downgraded certain ratings of Endo Luxembourg Finance I Co. Sarl, a subsidiary of Endo International plc, including the corporate family rating to B2 from B1 and probability of default rating to B2-PD from B1-PD.
The agency also assigned a Ba2 rating to the proposed senior secured credit facilities and affirmed the Ba2 ratings on the existing senior secured debt.
At the same time, Moody's affirmed the senior unsecured notes of Endo Finance Co. and Endo Finance LLC at B3. There is no change to the SGL-2 speculative grade liquidity rating.
The outlook was revised to stable from negative.
Moody's expects proceeds from the new secured term loan B, in combination with additional secured debt expected to be raised in the near-term, will be used to refinance Endo's existing term loan A and B. The agency will withdraw the ratings of the existing term loan A and B upon repayment.
Moody’s said the downgrade of the corporate family rating to B2 reflects challenges in Endo's branded and generic segments at the same time that the company's free cash flow will be constrained by almost $1 billion in cash outflows related to vaginal mesh litigation settlements.
“Over the short-term, Endo will benefit from a significant boost to earnings and cash flow related to the six month exclusive launches of generic versions of blockbuster drugs, Zetia and Seroquel XR,” the agency said in a news release.
“However, Endo's revenues from these products will face significant erosion following the entrance of competitors in mid-2017.
“Further, Endo's base generics business faces declines of roughly 30% this year due mainly to price declines in the opioid portfolio and its branded pain portfolio also faces competitive and regulatory headwinds. As a result, Moody's expects earnings in 2017 to be lower than 2016, resulting in debt to EBITDA that will be sustained above 5 times over the next 12 to 18 months.”
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