Moody’s raises Huvepharma, rates loans Ba3

Moody's Investors Service said it upgraded Huvepharma International BV’s corporate family rating to Ba3 from B1 and probability of default rating to B1-PD from B2-PD.

The outlook on all ratings is stable.

Concurrently, the agency upgraded the ratings of the existing €75 million senior secured term loan A due in 2019, the €180 million senior secured term loan B due in 2020 and a senior secured revolving credit facility due in 2019, the amount of which was extended to €40 million from the initial €20 million, to Ba3 from B1.

Moody's also assigned a Ba3 rating to the new $16 million senior secured term loan A2 due in 2019, $44 million senior secured term loan B2 due in 2020, €48 million senior secured capex facility due in 2019 and €45 million senior secured acquisition facility due in 2020.

Moody's expects that Huvepharma will use the proceeds from the senior secured term loans A2 and B2 to finance the acquisition of Zoetis' assets. The capex and acquisition facilities will support Huvepharma's further expansion plans in the upcoming years, while the increased revolver will enhance its liquidity position.

The upgrade to Ba3 reflects Huvepharma’s robust financial performance, well ahead of the agency’s initial expectations driven by strong and profitable growth, healthy cash flow generation and conservative financial policy. Despite a substantial step up in leverage in 2014 following the debt-funded buyback transaction with adjusted debt/EBITDA increasing to 3.9 times from below 1.5 times in 2012-13, the company's leverage remained significantly below the level Moody's initially expected, of around 4.9 times. The company also proved its ability to quickly deleverage with adjusted debt/EBITDA reducing to 3.3 times in the third quarter of 2015.

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