Fitch gives Recipharm B, loan B+

Fitch Ratings said it gave Roar Bidco AB (Recipharm) an expected first-time B long-term issuer default rating. The outlook is positive. Fitch also assigned Recipharm’s €1.115 billion first-lien term loan, an expected senior secured rating of B+ with an RR3 recovery rating.

The B(EXP) IDR is constrained by high funds from operations (FFO) gross leverage following the leveraged buy-out, at around 7.4x in 2021, a highly competitive CDMO market, especially within solids (representing 44% of Recipharm's sales) and large-scale customers with strong bargaining power. However, the company has shown solid operating performance by moving up the product value chain with improved scale as the number four CDMO globally with a broad product offering, including more advanced sterile and drug delivery technologies. High barriers to entry, regulatory approvals and high switching costs provide for a sticky customer base, which further support the rating,” Fitch said in a press release.

The outlook reflects the view that Recipharm will continue delivering solid operating and financial performance supported by a prudent M&A and investment policy, leading to FFO gross leverage trending structurally below 6.5x by 2023, which, if reached, would be commensurate with a higher rating, the agency said.

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