Moody's cuts Icon, rates loans Ba1

Moody's Investors Service said it assigned a Ba1 corporate family rating and a Ba1-PD probability of default rating to Icon plc and withdrew the Baa3 long-term issuer rating. Concurrently, the agency assigned a Ba1 rating to the new $4 billion senior secured term loan and to the new $300 million senior secured multicurrency revolving credit facility made available to Icon Luxembourg Sarl and other co-borrowers.

The outlook has been changed to stable from under review. The downgrade and outlook revision conclude the review started on Feb. 26, following the announced acquisition of PRA Health Sciences, Inc., Moody’s said.

“The Ba1 rating assigned reflects Icon's improved market position as a pure-play contract research organization (CRO). The combined group will become the second largest CRO in the world, with broader capabilities, technological and therapeutic breadth, including a leading position in functional solutions as well as in decentralized and hybrid trials. Also, the agency believes the combined group improves Icon's customer concentration which previously Moody's considered a credit challenge,” the agency said in a press release.

The rating also considers the post-closing financial leverage with Moody's adjusted gross leverage of 6.5x for the last 12 months to March 2021, pro forma the combined group and new capital structure at closing, which the agency expects will close at 5.4x at end-2021, Moody’s said.

Moody’s said it expects Icon to deliver adjusted free cash flow of around $700 million to $850 million over the next two years which it assumes will be used to repay debt. Therefore, the agency forecasts Moody's adjusted gross leverage will trend towards 3x by 2023.

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