Moody's gives SGD Pharma B2

Moody's Investors Service said it gave a first-time B2 corporate family rating and a B2-PD probability of default rating to SGD Pharma (Silica SAS), the top entity of the restricted group of SGD Pharma SAS. Concurrently, Moody's assigned a B2 rating to the expected €500 million senior secured first-lien term loan due 2028 and to the €90 million senior secured first-lien revolving credit facility due 2028 to be borrowed by SGD Pharma. Moody's has also assigned SGD Pharma a stable outlook.

"The B2 rating reflects SGD Pharma's focused product offering in a competitive industry, its exposure to fluctuating input prices and currencies, the high opening leverage, limited free cash flow generation due to increasing capital spending, some risk in executing its growth plan, and a weaker than expected year-to-date trading," said Donatella Maso, a Moody's vice president. senior analyst, and lead analyst for SGD Pharma, in a press release.

"At the same time, the rating reflects the company's robust market positions in the glass pharma packaging industry that displays some barriers to entry and positive fundamentals, a diversified customer base and track record of historic growth above market rates in the 2017-2020 period", added Maso.

Private equity firm PAI will use the term loan proceeds together with €340 million of equity to support the acquisition of SGD Pharma and pay for transaction fees. About €100 million of the equity will be down streamed to the restricted group through a shareholders loan. Moody's said it assumes the loan will qualify as equity under its criteria.

The outlook reflects underlying strong market fundamentals and the expectation that SGD Pharma will resume its growth trajectory and lower its gross leverage toward 6x in 2022, Moody’s said.

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