Moody's downgrades Seqens

Moody's Investors Service said it downgraded to B3 from B2 the long-term corporate family rating and to B3-PD from B2-PD the probability of default rating on Sirona HoldCo (Seqens). The agency also downgraded to B3 from B2 the instrument ratings on Sirona BidCo France's €930 million senior secured term loan B (TLB) and the €130 million senior secured revolving credit facility, both due 2028.

“Today's rating action follows a series of operational events which, together with continued general weakness in demand, will result in Seqens credit metrics remaining outside our expectations for its prior B2 rating over at least the next year,” Moody’s said in a press release.

The agency noted an incident at its Newburyport, Mass., its dispute with Mithra Pharmaceuticals over the Estetrol molecule resulting in restructuring at one of its French manufacturing sites and unpaid receivables of €31 million, disruptions at its Wavelength manufacturing facilities in Israel following the outbreak of the military conflict between Israel and Hamas in October, lower contributions from the para amino phenol (PAP) products as price and volume normalized after Chinese competitor Bayi resumed production.

“The above effects result in a sizeable EBITDA shortfall relative to management's budget (around €155 million expected in 2023 against a budget of €194 million) and overall weaker metrics in 2023 and 2024. Moody's does not expect the recently launched cost savings program, which management expects to yield €30 million run-rate savings in 2024 and €40 million thereafter, and working capital optimization (expected inventory release of €40 million) to sufficiently offset the operating challenges,” Moody’s said.

The outlook on both entities remains stable.

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