Moody’s rates Cheplapharm, loans B1

Moody's Investors Service said it assigned a B1 corporate family rating and a B1-PD probability of default rating to Cheplapharm Arzneimittel GmbH, the parent company of the Cheplapharm group.

Concurrently, the agency assigned B1 instrument ratings to €830 million of senior secured term loans B (€530 million term loan B1 and €300 million term loan B2, respectively) and to €250 million of senior secured revolving credit facilities.

The outlook is stable.

Moody’s said the B1 corporate family rating is mainly supported by the company's: (a) Profitable and cash flow generative business model focused on acquiring IP rights of branded off patent products from big pharma companies with a strategy to outsource both production and distribution to third parties; (b) strong portfolio of legacy and niche products with a good therapeutic and geographical diversity despite the group's small size; and (c) successful track record of running its business model, which enabled Cheplapharm to become a strong partner of well-established big pharma companies looking to divest tail branded products or small portfolios.

The rating is also supported by Cheplapharm’s: (a) Strict investment criteria focused on short payback periods, which should protect creditors from sales erosion typical of off patent branded products in the late stages of their life cycle; and (b) more conservative financial policies than private equity owned companies and more stringent terms and conditions under the loan documentation than current market standards.

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