S&P gives Embecta, loans B+

S&P said it gave B+ ratings to Embecta Corp. and its planned $500 million first-lien revolver, $1.15 billion first-lien term loan and $500 million of other secured financing. Embecta is being spun off from Becton Dickinson & Co. The loans’ recovery rating is 3, indicating an expectation for meaningful (50%-70%; rounded estimate: 50%) recovery in default.

“Our rating reflects the company's therapeutic concentration and competition from more technologically advanced solutions, which are partially offset by its strong brand, global market presence, and our expectation of continued demand for its lower-cost products. Embecta has a solid franchise in insulin pen needles and syringes for use in the diabetes space and maintains significant worldwide market share in this category.

“However, its insulin pen needle and syringe sales account for almost all of its revenue. In addition, the insulin delivery market is slowly transitioning toward more technologically advanced and convenient solutions, such as insulin pumps,” the agency said in a press release.

The outlook is stable, reflecting a forecast that Embecta will probably maintain S&P Global Ratings-adjusted leverage in the 4x-5x range and free operating cash flow (FOCF) to debt of comfortably above 5% over the next several years, S&P said.

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