Moody’s cuts Amneal

Moody’s Investors Service said it downgraded the ratings of Amneal Pharmaceuticals, LLC, including the corporate family rating to B3 from B2, probability of default rating to B3-PD from B2-PD and senior secured term loan rating to B3 from B2. At the same time, Moody’s revised the outlook to stable from rating under review. There was no change to Amneal’s SGL-2 speculative grade liquidity rating. This rating action concludes the review for downgrade started on Nov. 7.

The rating downgrade reflects Moody’s expectation Amneal’s earnings will improve in 2020, from trough levels in 2019, but debt/EBITDA will remain above 6.5x (inclusive of the recently closed acquisition of AvKare) through 2021. Moody’s estimates adjusted debt/EBITDA, pro forma for Avkare was around 7.5x for the 12 months ended Dec. 31. Earnings will continue to be burdened by operating inefficiencies and erosion on the base generics business.

The stable outlook reflects Moody’s view that despite earnings growth, Amneal’s financial leverage will stay high through 2021. “It will take several years to meaningfully improve earnings, specifically to address operational inefficiencies, including failure to supply penalties, suboptimal plant utilization and excess inventory obsolescence,” Moody’s said in a press release.

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