Moody's rates Stiefel loans Ba3, B3

Moody's Investors Service said it assigned B1 corporate family and probability-of-default ratings to Stiefel Laboratories, Inc., Ba3 ratings with loss-given-default assessments of LGD3 (41%) to the company's proposed $75 million senior secured first-lien revolving credit facility and $623 million senior secured first-lien term loan and a B3 rating with a loss-given-default assessment of LGD6 (91%) to its proposed $150 million senior secured second-lien term loan.

The outlook is stable.

The proceeds of the proposed offering are expected to be used primarily to acquire the stock of Connetics Corp. for $620 million, retire Connectics' outstanding debt and refinance the existing debt of Stiefel.

The agency said Stiefel's ratings reflect the modest scale of the combined company with pro forma revenue for the 12 months ended Sept. 30 of $730 million and the significant increase in financial leverage following the acquisition. Following the transaction, the company's funded debt of $810 million will exceed pro forma revenue, and the considerable financial leverage, along with increased capital spending in the next few years, are also expected to constrain cash flow coverage of debt in the near term, the agency said.

However, Moody's expects the company to be able to generate sufficient cash flow to fund the increased capital spending and to reduce debt. Additionally, the agency believes Stiefel's diverse product portfolio should be a credit positive over the rating horizon and said the combined company has modest exposure to patent expirations and challenges over the near term.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.