Moody’s: Biostime unaffected

Moody's Investors Service said Biostime International Holdings Ltd.'s Ba2 corporate family rating and the Ba3 rating on its senior notes are unaffected by news of the company's tap bond offering on its existing $400 million senior notes due June 21, 2021.

The outlook is stable.

The proceeds, along with cash on hand, will be used to fund Biostime's proposed acquisition of an additional 17% stake in Biostime Australia Holdings Pty Ltd., Moody’s said.

The transaction will raise Biostime's stake in Biostime Australia to 100% from 83%, the agency said.

Biostime's additional issuance is consistent with the funding expectation for the proposed increased stake, Moody’s explained.

Due to the issuance, Biostime's debt-to-EBITDA ratio is expected to rise to about 3.8x to 4x in the next 12 months, compared with a previous expectation of about 3.5x in 2016, the agency said.

This expected level represents a narrowing in headroom versus its trigger of 3.5 to 4x, Moody’s said.

The agency said it estimates that Biostime's cash flow coverage – as measured by retained cash flow-to-net debt – will fall below the trigger of 15% in the next 12 months, the agency said.

But, Moody’s said this situation is temporary and the ratio is expected to recover to 16% to 17% in the next 18- to 24-months due to scheduled debt repayments.

The company’s stable business profile is supported by the strength of its infant milk formula business, resulting from its premium product positioning and its strong presence in baby specialty store channels, which is evidenced by its steady market share, the agency said.

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