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11 Apr 2011
Rating outlook expected to be revised to negative
New York, April 11, 2011 -- Moody's Investors Service affirmed the Ba2 Corporate Family Rating
and Ba2 Probability of Default Rating of Endo Pharmaceuticals Holdings
Inc. ("Endo"). At the same time, Moody's
placed the Ba2 rating on Endo's senior unsecured notes under review
for possible downgrade. At the conclusion of this review,
Moody's expects to revise Endo's rating outlook to negative.
These rating actions follow the announcement that Endo will acquire American
Medical Systems Holdings, Inc. ("AMS") for $30
per share or $2.9 billion including the assumption and repayment
of AMS debt. The transaction is subject to customary approvals
and closing conditions, and is expected to closed in late third-quarter
Ba2 Corporate Family Rating
Ba2 Probability of Default Rating
Rating placed under review for possible downgrade:
Ba2 (LGD4, 58%) senior unsecured notes of $400 million
The SGL-1 Speculative Grade Liquidity Rating and the LGD point
estimates are subject to revision upon completion of the transaction.
The affirmation of Endo's Ba2 Corporate Family Rating reflects greater
size, scale and diversity provided by AMS acquisition, a favorable
impact on Endo's margins and cash flow, potential synergies
with Endo's existing urology and medical device products,
and good opportunities for deleveraging.
Moody's is reviewing for possible downgrade the Ba2 rating on Endo's
$400 million of senior unsecured notes due 2020 because the addition
of any secured debt to Endo's capital structure may result in subordination
of these notes. Endo has stated that new debt will be comprised
of a combination of term loans and bonds. Moody's will conclude
the rating review of the senior unsecured after the final financing terms
have been announced.
Upon conclusion of the rating review, Moody's anticipates
revising the outlook on Endo's ratings to negative, reflecting
the substantial increase in financial leverage to a level greater than
Moody's expectations. The rating outlook had been stable
since the initial rating assignment on November 15, 2010.
Moody's estimates pro forma debt/EBITDA of 4.1 times,
including a modest benefit from expected cost synergies, compared
to Moody's previous assumption that Endo's debt/EBITDA would
not materially exceed 2.5 times. As a result, there
is slim cushion in Endo's Ba2 Corporate Family Rating for any operating
setbacks or additional financial leverage. Rapid improvement in
leverage through a combination of EBITDA growth and debt reduction would
strengthen Endo's position within the Ba2 Corporate Family Rating.
Endo's Corporate Family Rating could be downgraded if Endo does
not make rapid progress towards reducing debt/EBITDA towards 2.5
times. Although not expected in the near term, the ratings
could be upgraded if Endo substantially increases its size, scale
and diversification while sustaining conservative credit metrics solidly
within Moody's "Baa" ranges, which includes debt/EBITDA of 1.75
times to 2.5 times.
Moody's does not rate Endo's amended $500 million senior secured
revolving credit facility due 2015, $400 million senior secured
Term Loan A due 2015, or $379.5 million 1.75%
senior subordinated convertible notes due 2015.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history
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.
Headquartered in Chadds Ford, Pennsylvania, Endo Pharmaceuticals
Holdings Inc. is a U.S.-focused specialty
pharmaceutical company that develops, manufactures and markets branded
and generic prescription pharmaceutical products primarily in the areas
of pain management and urology, as well as medical devices and services
solutions focused primarily in urology. For the year ended December
31, 2010 Endo generated total revenues of approximately $1.7
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's affirms Endo's Ba2 CFR; reviews Ba2 bonds for downgrade
250 Greenwich Street
New York, NY 10007
No Related Data.
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