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16 Feb 2011
New York, February 16, 2011 -- Moody's Investors Service Moody's affirmed the B2 Corporate Family
Rating of Axcan Intermediate Holdings Inc. ("Axcan Intermediate"),
the parent of Axcan Pharma Inc. ("Axcan") and Axcan Pharma US,
Inc., based on Axcan's recently completed financing
arrangements. Additionally, Moody's affirmed Axcan's
B1 senior secured rating, Caa1 senior unsecured rating and SGL-2
Speculative Grade Liquidity Rating. The rating outlook remains
Final terms of Axcan's financing include a senior secured term loan
of $750 million and senior secured revolving credit commitments
totaling $147 milling. The revolving commitments are comprised
of $115 million of extended commitments maturing in 2016 and $32
million of existing, unextended commitments maturing in 2014.
The revolving credit commitments are currently undrawn. The proposed
new senior secured notes of $225 million rated on January 26,
2011 have been cancelled, and Moody's is withdrawing the rating
on this instrument.
Proceeds of the financing are being used to fund the acquisition of Eurand
N.V. ("Eurand"), and to repay Axcan's existing
9.25% senior secured notes of $228 million due 2015.
Upon repayment of the senior secured notes, Moody's will withdraw
the rating on this instrument.
In addition, proceeds have been used to repay Axcan's existing Term
Loan A borrowings, and the rating on this instrument is being withdrawn.
The LGD point estimate on the new $115 million revolver and the
$750 million Term Loan is being revised to B1(LGD3, 39%)
from B1(LGD3, 38%).
Moody's is lowering the rating on Axcan's existing revolver
due 2014 to B1 (LGD3, 39%) from Ba3 (LGD2, 27%).
This rating is consistent with the rating on the new revolver commitments
and the $750 million senior secured term loan.
Axcan's B2 rating reflects the benefits of the acquisition of Eurand N.V.
including improvements in scale, product diversity and market share
in the PEP category driven by Eurand's approved PEP product, Zenpep.
The acquisition also provides the opportunity to realize significant transaction-related
synergies. The ratings are constrained by high financial leverage
resulting from the Eurand transaction as well as continued delay in FDA
approval for Axcan's Ultrase and Viokase PEP products.
The ratings could be upgraded if Axcan substantially increases its size,
scale and product diversity while improving its credit metrics to levels
that appear sustainable at the high-end of Moody's "B" ranges (e.g.
Debt/EBITDA of 4.0x). Downward rating pressure could result
from a sustained decline in CFO/Debt below 5% or if Debt/EBITDA
does not appear sustainable below 6.0 times over the intermediate-term.
Such a scenario appears unlikely in the ordinary course of business but
could result from a significant debt-financed acquisition.
Ratings affirmed (some with LGD point estimate revisions)
B2 Corporate Family Rating
B2 Probability of Default Rating
Caa1 (LGD6, 90%) senior unsecured notes due
SGL-2 Speculative Grade Liquidity Rating
Ratings affirmed with LGD point estimate revisions:
Senior secured term loan at Ba3 (LGD3, 39%) from Ba3 (LGD3,
38%), upsized to $750 million
Senior secured revolving credit agreement of $115 million due 2016
at Ba3 (LGD3, 39%) from Ba3 (LGD3, 38%)
Senior secured revolving credit facility of $115 million due 2014
to B1 (LGD3, 39%) from Ba3 (LGD2, 27%),
with commitment amount reduced to $32 million
B1 (LGD3, 38%) $225 senior secured notes
Ba3 (LGD2, 27%) senior secured Term Loan A due 2014
For additional information please refer to Moody's Credit Opinion on Axcan
Intermediate Holdings, Inc. available on www.moodys.com.
The principal methodologies used in this rating were Global Pharmaceutical
Industry published in October 2009, and Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
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validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
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Please see the ratings disclosure page on our website www.moodys.com
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used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's affirms Axcan Pharma on final financing terms
250 Greenwich Street
New York, NY 10007
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