Moody’s gives Neopharmed, notes B3

Moody’s Ratings said it assigned a B3 corporate family rating and B3-PD probability of default rating to Neopharmed Gentili SpA. At the same time, Moody's assigned B3 instrument ratings to Neopharmed's planned €750 million of senior secured notes due 2030. The outlook is stable.

Neopharmed’s rating is supported by its good cash flow generation capacity driven by high EBITDA margin of around 40%, which the company plans to boost to 45% by the end of 2025, and asset-light business model. The company has a track record of integrating its acquisitions and extracting the expected synergies that historically fueled its revenue and EBITDA growth, the agency said.

The B3 rating also reflects the company's geographic focus in Italy, thereby making it susceptible to potential changes in Italy's regulatory framework that could hurt the company's growth trajectory. “Furthermore, the company's high Moody's-adjusted total debt to EBITDA estimated to be 7.3x as of Dec. 31, 2023 (which includes €17 million of non-operating expenses mainly related to severance costs, per Moody's calculations) pro forma the contemplated refinancing transaction, is expected to remain high at around 6.5x by the end of 2024,” the agency said in a press release.

However, Moody’s noted it expects a decrease in leverage to under 6x by the end of 2025 with improving cash flow generation.

Neopharmed plans to refinance its debt and fund transaction fees and expenses with the new notes.

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