Moody's rates Cheplapharm loan B1, negative view

Moody's Investors Service said it affirmed Cheplapharm Arzneimittel GmbH's (Cheplapharm) corporate family rating at B1 and probability of default rating at B1-PD.

The agency also said it assigned a new B1 instrument rating to the proposed €980 million of new senior secured term loan B3, along with a B1 rating to the new €310 million of senior secured revolving credit facility.

Moody's also said it would expect to withdraw the legacy instrument ratings of the term loan B1, term loan B2 and revolving credit facility once the proposed transaction will have been closed and the legacy term loans repaid.

The outlook also was changed to negative from stable.

The ratings reflect the company's solid operating performance and cash flow generation during the course of fiscal year 2018 and at the start of 2019, Moody's said.

The company's reported EBITDA exceeded budget by 14% in 2018 to reach €167 million and by 23% in the first quarter of 2019 to reach €65 million for the quarter, the agency explained.

The acquisitions made since the initial rating in June 2018 have strengthened the group's product and therapeutic diversity, reducing the group's exposure to single off patent legacy drugs that are losing volumes against generic competition over time, Moody's said.

The negative outlook is prompted by the very rapid pace of external growth and by the renegotiation of both the net senior secured and total net leverage incurrence test levels in the senior facilities agreement, which is contrary to what Moody's had expected when the rating was set, the agency noted.

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