S&P ups Mallinckrodt view to stable

Standard & Poor’s said it affirmed its BB- corporate credit rating on Mallinckrodt plc and revised the outlook to stable from negative.

The agency also affirmed all existing issue-level ratings on Mallinckrodt’s outstanding debt. The recovery ratings are unchanged.

“The outlook revision reflects our assessment that Mallinckrodt will be able to improve its leverage to the mid-4.0x range in 2016 as a result of increased profitability and strong cash flow generation, despite its continued appetite for medium-size acquisitions,” said S&P credit analyst Maryna Kandrukhin in a news release.

The company’s 2015 EBITDA margin expanded to 39.5%, compared to S&P’s previous projection of 31.5%, following successful acquisition/integration of higher-margin branded products and recent divestiture of the lower margin contrast media and delivery systems business.

S&P said it expects the company to sustain its margins at the improved level and are revising its 2016 adjusted leverage projection to 4.5x, modestly lower than its previous projection of 4.9x and consistent with its current assessment of its financial risk profile as aggressive.

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