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I AGREE
11 Mar 2011
Approximately $2.425 billion of new debt rated
New York, March 11, 2011 -- Moody's Investors Service affirmed the B1 Corporate Family Rating and
B1 Probability of Default Rating of Quintiles Transnational Corp.
("Quintiles") and assigned a B1 rating to the proposed $2.425
billion senior secured credit facility. The new credit facility
will include a $2.2 billion Term Loan B and a $225
million revolving credit facility. The proceeds of the term loan
will be used to refinance substantially all of Quintiles' existing
debt, including indebtedness under the existing credit agreement
and $525 million of senior unsecured notes issued at Quintiles
Transnational Holdings. Approximately $500 million of the
new Term Loan proceeds will be retained as cash on the balance sheet,
although Moody's believes it is highly likely the proceeds will
ultimately be used for a shareholder payout, either a dividend or
share repurchase. The rating outlook is stable.
Summary of Moody's actions:
Quintiles Transnational Corp.
Affirmed B1 Corporate Family Rating
Affirmed B1 Probability of Default Rating
Assigned B1 (LGD 3, 46%) to proposed $225 million
senior secured revolving credit facility, due 2016
Assigned B1 (LGD 3, 46%) to proposed $2.2 billion
senior secured Term Loan B, due 2018
The outlook is stable.
The following ratings will be withdrawn upon repayment:
Quintiles Transnational Corp.
$225 million senior secured revolving credit facility due 2012,
Ba2 (LGD2, 27%)
$950 million first lien senior secured term loan due 2013 Ba2 (LGD2,
27%)
$220 million second lien term loan due 2014, B2 (LGD 4,
66%)
Quintiles Transnational Holdings Inc.
B3 (LGD5, 89%) senior unsecured notes of $525 million
due 2014
Quintiles' B1 Corporate Family Rating is constrained by the company's
somewhat high financial leverage and modest free cash flow relative to
debt (FCF/debt), which are in-line with other B1 rated peers.
The ratings also reflects the company's history of aggressive financial
policies, including numerous dividends to shareholders and share
repurchase transactions. The ratings are supported by the company's
size, scale and leading position as both a pharmaceutical contract
research organization ("CRO") and a contract sales organization ("CSO").
Further, the company has demonstrated stable operating performance
and cash flow, even during the economic downturn. The ratings
are also supported by the company's liquidity profile, which
is expected to continue to be very good over the next year. Longer-term
Moody's views the prospects for the CRO and CSO industries as favorable
as pharmaceutical companies look to outsource an increasing portion of
their non-core functions. However, Moody's believes
that the impending patent cliff in the pharmaceutical industry presents
some near to medium term event risk for the CRO and CSO industries.
Moody's could upgrade the ratings of Quintiles if the company demonstrates
continued stable revenue growth and margins and sustains "Ba" credit ratios
per the Business & Consumer Services Rating Methodology. The
"Ba" ranges include (CFO-dividends)/net debt of 15%-25%,
FCF/debt of 8-16% (after dividends); and debt/EBITDA
of 3.0x-4.0x. Moody's could downgrade
the ratings if the company experienced revenue declines and/or margin
erosion due to broader trends within the CRO or CSO industry or if the
company undertook a significant debt-financed acquisition or shareholder
initiatives beyond Moody's expectations. For example,
sustained CFO/debt below 5%, adjusted debt to EBITDA above
5.5 times; or negative free cash flow could lead to rating
pressure.
For additional information, please refer to Moody's updated Credit
Opinion on Quintiles Transnational Corp. available on moodys.com
The principal methodologies used in this rating were Global Business &
Consumer Service Industry Rating Methodology published in October 2010,
and Loss Given Default for Speculative-Grade Non-Financial
Companies in the U.S., Canada and EMEA published in
June 2009.
Headquartered in Research Triangle Park, North Carolina, Quintiles
is a leading global provider of outsourced contract research and contract
sales services to pharmaceutical, biotechnology and medical device
companies. The company is privately-held with ownership
stakes by founder, Chairman and CEO, Dr. Dennis Gillings,
and private equity firms Bain, TPG, 3i and Temasek.
Quintiles recorded net revenue of approximately $3.0 billion
for the twelve month period ended December 31, 2010.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not 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
is not an auditor and cannot in every instance independently verify or
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.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Jessica Gladstone
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Lenny J. Ajzenman
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's affirms Quintiles' B1 CFR; new credit facility rated B1
No Related Data.
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