Moody’s could drop Endo

Moody's Investors Service said it placed the ratings of Endo Luxembourg Finance I Co. Sarl and its subsidiaries under review for downgrade, including the Ba3 corporate family rating, Ba3-PD probability of default rating, Baa3 senior secured rating and B1 senior unsecured rating.

The SGL-2 speculative grade liquidity rating was affirmed.

The review was prompted by Endo's unsolicited bid to acquire Salix Pharmaceuticals Ltd. for $175 per share in cash and stock. This represents an 11% premium relative to the deal reached on Feb. 22 between Salix and Valeant Pharmaceuticals International, Inc.

Despite a high equity component, Moody’s said the transaction would increase Endo's financial leverage.

The review also reflects limited cushion within Endo's current rating because of a recent increase in financial leverage to acquire Auxilium Pharmaceuticals for $2.6 billion, and because of high litigation costs over the next two years, the agency said.

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