Fitch to rate Elanco loan, notes BBB-

Fitch Ratings said it expects to rate the secured debt to be issued by Elanco Animal Health Inc. and co-issued by Elanco US Inc. BBB-. The ratings apply to the anticipated secured revolving credit facility, secured term loan(s) and secured note(s). Fitch also assigned a BB+ long-term issuer default rating to Elanco US. Fitch said it maintained the rating watch negative on all of Elanco Animal’s ratings.

Fitch said it will resolve the RWN upon the closing of the transaction, expected in the second half of 2020 or earlier if substantially all regulatory approvals are received. The most likely rating actions are an affirmation with, potentially, a negative outlook or a one-notch downgrade of the IDR.

Fitch estimates Elanco Animal will reduce leverage to below 3.5x (the lower end of the range considered consistent with the current BB+ rating) in 2022, or within two-years of the closing. Fitch said its increased confidence centers on the company having issued about twice the amount of equity than was implied in the public disclosure at the announcement through the recently priced common share offering and the tangible equity unit offering (the majority of which is considered equity under Fitch's criteria).

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