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Rating Action:

Moody's assigns B1 to Atom Intermediate (Axcan Pharma); ratings outlook stable

25 Jan 2008
Moody's assigns B1 to Atom Intermediate (Axcan Pharma); ratings outlook stable

$750 million of debt affected

New York, January 25, 2008 -- Moody's Investors Service assigned Ba2 ratings to the proposed senior secured credit facilities of Atom Intermediate Holdings, Inc. ("Atom Intermediate"), an acquisition vehicle intended to purchase Axcan Pharma Inc. ("Axcan"). Moody's also assigned a B3 long-term debt rating to Atom Intermediate's proposed $275 million of senior unsecured notes. Concurrently Moody's assigned a B1 Corporate Family Rating to Atom Intermediate. The outlook for the ratings is stable.

The ratings were assigned in connection with the all-cash acquisition of Axcan by TPG Capital through a combination of equity and debt financing. Proceeds from the proposed Ba2-rated $350 million term loan B and the B3-rated $275 million senior unsecured notes, along with about $470 million in equity and, also, cash on hand will be used to purchase 100% of the equity of Axcan, refinance a small amount of existing debt and pay expenses associated with the transaction. The Ba2-rated $125 million revolver includes a sub-facility for letters of credit. At closing, the revolver is expected to be undrawn. The bank facilities include a $75 million accordion feature (not rated).

The ratings are constrained by a relatively high level of pro forma financial leverage as of the September 30, 2007 fiscal year end, which is in line with the B1 Corporate Family Rating; the ratings are also constrained by the lack of patent protection on the company's main products and the likelihood of near term generic competition with respect to Urso, which forms a significant percentage of the company's revenues. In addition, Axcan's small revenue base, current dependence on four product groups and the uncertain growth prospects of drugs currently in Axcan's pipeline are significant credit risks.

Nonetheless, the ratings reflect Axcan's prominent market position in the gastroenterology field and its success in growing market share in individual branded drugs in recent years. Notwithstanding ongoing pressure from payors globally, the ratings also benefit from continuing above-inflation trends with respect to prescription medication pricing.

Moody's assigned the following ratings:

Corporate Family Rating, rated B1;

Probability of Default Rating, rated B1;

$125 million senior secured revolving credit facility due 2014, rated Ba2 (LGD 2, 26%);

$350 million senior secured term loan B due 2015, rated Ba2 (LGD 2, 26%);

$275 million senior unsecured notes due 2016, rated B3 (LGD 5, 81%);

The ratings outlook is stable.

Moody's also assigned a Speculative Grade Liquidity Rating of SGL 2 to Atom Intermediate. The ratings of Atom Intermediate will be transferred to the continuing entity, which will be the borrower under the credit facilities and issuer of the notes.

For additional information, subscribers should refer to Moody's Credit Opinion on moodys.com.

Axcan Pharma Inc., based in Mont St-Hilaire, Quebec, is a specialty pharmaceutical company concentrating in the field of gastroenterology with operations in North America and Europe. Axcan had revenue of approximately US$349 million for the fiscal year ended September 30, 2007.

New York
Patrick Finnegan
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Costas Chrysostomou
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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