S&P rates Specialty Pharma III, loan B-

S&P said it assigned B- ratings to Specialty Pharma III Inc. (Wedgewood Pharmacy) and its new $50 million incremental delayed-draw first-lien term loan. The loan’s recovery rating is 3, indicating meaningful (50%-70%; rounded estimate: 50%) recovery prospects in a hypothetical default. The outlook is stable.

The agency concurrently withdrew its B- rating on Specialty Pharma II Inc. “We moved the issuer credit rating to Specialty Pharma III Inc. because it is the issuer of the group's financial statements and the borrower of its debt,” S&P said in a statement.

“Our B- issue-level rating and 3 recovery rating on the existing first-lien term loan are unchanged,” S&P added.

The outlook is stable reflecting an expectation that Wedgewood will boost its revenue by the double-digit percent area annually (with a mid-to-high-single-digit percent rise in its organic revenue), aided by a strong expansion in the outsourced U.S. animal health compounding pharmacy market. “It also reflects our expectation that the company will sustain S&P Global Ratings-adjusted leverage of more than 5x for the next several years and generate limited free operating cash flow,” the agency said.

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