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Rating Action:

Moody's affirms Maravai's B3 CFR; stable outlook

06 Oct 2020

New York, October 06, 2020 -- Moody's Investors Service ("Moody's") affirmed Maravai Intermediate Holdings, LLC's ("Maravai") B3 Corporate Family Rating and B3-PD Probability of Default Rating. Moody's also assigned B3 ratings to the company's proposed new $600 million first lien term loan and $150 million revolving credit facility. The outlook remains stable.

Proceeds from the proposed refinancing will be used to (1) repay $361 million of existing first and second lien debt, (2) repurchase $129 million of Cygnus minority interests, and (3) fund a $94 million distribution to Maravai's shareholders and (4) fees and expenses. Upon completion, Moody's expect to withdraw the rating of Maravai's first lien and second lien debt instruments that will be retired as part of the proposed transaction.

Ratings affirmed:

..Issuer: Maravai Intermediate Holdings, LLC

.... Corporate Family Rating, Affirmed B3

.... Probability of Default Rating, Affirmed B3-PD

Ratings assigned:

..Issuer: Maravai Intermediate Holdings, LLC

....Senior Secured First Lien Term Loan due 2027, B3 (LGD4)

....Senior Secured Revolving Credit Facility due 2025, B3 (LGD4)

Outlook Actions:

..Issuer: Maravai Intermediate Holdings, LLC

....Outlook, Remains Stable

RATINGS RATIONALE

Maravai's B3 CFR is constrained by Moody's expectation that leverage -- currently 6.3x pro forma -- will remain high, and above 5 times over the next 12 months following the recent shareholder distribution. Further, Moody's expects that improving financial flexibility from earnings growth will be used either for business development or for shareholder distributions, reflecting Maravai's private equity ownership. Maravai's rating is constrained by its modest market position where it competes with significantly larger and well-capitalized players. In addition, Maravai has a somewhat limited operating track record, as the company was formed through a series of acquisitions. These challenges are tempered by the company's high profit margins and Moody's expectation for at least mid-to-high single digit revenue growth over the next 12 to 18 months. Revenue growth will be driven by favorable demand trends for Maravai's products used in drug R&D and manufacturing, and other end markets such as components for COVID-19 vaccine candidates. While these bring sizeable opportunities for Maravai, the nascent mRNA technology that is being used in some COVID-19 vaccines programs makes the impact difficult to quantify until more data on the vaccine candidates is available.

Moody's expects that Maravai will have very good liquidity over the next 12-18 months, characterized by free cash flow of at least $60 million annually, with significant upside depending on the success of COVID-19 vaccine programs. Moody's expects capex to be roughly $30 million in 2020 including investments in on-going capacity expansion but to decrease in 2021 to $10 to $15 million. As of the end of June 2020, Maravai had $84 million of cash and equivalents. Internal liquidity will be supported by the proposed $150 million revolving credit facility expiring 2025 that is expected to be undrawn at close.

Environmental risks are not considered material to Maravai's credit rating. The company has some exposure to the coronavirus outbreak - both positive and negative. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. The temporary closure of research labs creates a revenue headwind for Maravai's protein detection business, which will shave off a couple of percentage points of revenue growth for the whole company in 2020. On the other hand, Maravai is involved with several COVID-19 vaccine research projects where it applies its technological expertise in the field of cell and gene therapy to provide vaccine components for pharmaceutical and biopharma companies. This in turn is providing a material revenue tailwind for the company, but its duration and magnitude will be largely dependent on the success of the various vaccine development programs. From a governance perspective, Maravai's high leverage reflects an aggressive financial policy and its private equity ownership may lead to shareholder friendly actions which are detrimental to creditors.

The stable outlook reflects Moody's expectation that Maravai will continue to grow revenue and earnings, but that financial leverage will remain high to support business development.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

The ratings could be upgraded if the company materially increases its scale in its key business segments and adopts more conservative financial policies. Quantitatively, sustaining debt/EBITDA around 5.0x would support an upgrade.

The ratings could be downgraded if the company's liquidity deteriorates or operating performance weakens. A downgrade could also occur if Maravai increases its financial leverage.

Maravai Intermediate Holdings, LLC is the parent holding company of Maravai Life Sciences ("Maravai"). Maravai manufactures scientific reagents used in drug development and manufacturing, diagnostic tests, life science tools, and for other research purposes. Over 80% of revenue is derived from gene therapy and bioproduction. The company is owned by Chicago-based private equity firm GTCR and was formed through a series of acquisitions completed in December 2017. Annual sales are roughly $200 million.

The principal methodology used in these ratings was Manufacturing Methodology published in March 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1206079. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Jean-Yves Coupin
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Jessica Gladstone, CFA
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY100,000 to approximately JPY550,000,000.

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