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S&P gives Sharp, loans B-
S&P said it gave Sharp Midco LLC, its planned $90 million revolving credit facility and proposed $465.5 million first-lien term loan B- ratings. The recovery rating on the loans is 3, mirroring an expectation for meaningful recovery (50%-70%; rounded estimate 65%) in default. Sharp also plans to secure an unrated $157.5 million second-lien term loan.
Sharp’s owner Clayton, Dubilier, and Rice intends to spin it out from UDG Healthcare Ltd. CD&R will capitalize the company with the revolver, the two term loans and $641 million of preferred equity.
“Our ratings reflect the company's limited scale (about $380 million last-12-month revenue), narrow focus on outsourced pharmaceutical packaging, and limited negotiating power with much larger pharmaceutical customers. We also consider the potential risk of in-sourcing by large customers and the potential competition from larger, better-capitalized industry participants,” S&P said in a press release.
The outlook is stable, reflecting a forecast the company will post 8%-14% revenue growth annually over the next two years, maintain steady margins and generate modest free operating cash flow, the agency said.
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