Moody's rates Cheplapharm loan, notes B2

Moody's Investors Service said it assigned Cheplapharm Arzneimittel GmbH’s proposed €500 million of term loan B and the senior secured notes to be issued B2 ratings. The outlook is stable.

Cheplapharm intends to issue €500 million of new debt through a combination of senior secured notes and term loan B. Proceeds, along with €29 million of cash, will repay €295 million of drawings under the revolver and a €115 million bridge facility and prefinance the acquisition of the Sake portfolio, which comprises 10 cardiology and intensive care products, for €110 million.

Although the transaction will also increase reported net debt by €120 million, Cheplapharm will maintain credit ratios commensurate with its current B2 rating. On a Moody's-adjusted basis, Cheplapharm should achieve at constant scope, a gross debt/EBITDA of 5.3x as of year-end 2019, compared with 5.5x in 2018, and generate about €150 million of free cash flow. Assuming no acquisitions in 2020, apart from the purchase of Sake, which is already agreed, Cheplapharm's Moody's-adjusted gross leverage would fall to about 4.7x in 2020, the agency said.

Moody’s also affirmed the company’s B2 and B2-PD probability of default ratings.

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