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Global Credit Research - 26 Jan 2011
Approximately $1.1 billion of rated debt affected
New York, January 26, 2011 -- Moody's Investors Service assigned ratings of B1 to the new $225
million term loan, $115 million revolving credit facility
and $225 million senior secured note issuance of Axcan Intermediate
Holdings Inc. ("Axcan Intermediate"), the parent of Axcan
Pharma Inc. ("Axcan") and Axcan Pharma US, Inc. At
the same time, Moody's confirmed Axcan's B2 Corporate
Family Rating (CFR) and B2 Probability of Default Rating (PDR).
Following these actions, the rating outlook is stable. These
actions conclude the review for possible downgrade that Moody's
initiated on December 1, 2010.
Proceeds of the offering are expected to be used to fund the pending acquisition
of Eurand N.V. ("Eurand") and to repay Axcan's
existing Term Loan A borrowings. The increase in the senior secured
debt balance and application of Moody's Loss Given Default (LGD) Methodology
results in a downgrade of Axcan's existing 9.25% senior
secured notes to B1 from Ba3.
The confirmation of Axcan's B2 rating reflects the benefits of the
pending 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
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. Moody's estimates
pro forma gross leverage of approximately 6.2x prior to considering
cost synergies, reflecting Moody's analytical adjustments.
As synergies emerge over the near-term, Moody's anticipates
improvement in the company's leverage profile. Incorporating
approximately one-half of management's $54 million synergy
target, pro forma leverage improves to approximately 5.6x.
Axcan's leverage profile should also benefit from rising sales of
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
Ratings assigned (subject to final review of documentation):
B1 (LGD3, 38%) new $225 million senior secured notes
B1 (LGD3, 38%) new $225 million term loan B
B1 (LGD3, 38%) new revolving credit facility of approximately
Ratings confirmed (with LGD point estimate revisions):
B2 Corporate Family Rating
B2 Probability of Default Rating
Ba3 (LGD2, 27%) senior secured revolving credit facility
of $115 million due 2014 (rating to be withdrawn at close)
Ba3 (LGD2, 27%) senior secured Term Loan A (rating to be
withdrawn at close)
Caa1 (LGD6, 90%) 12.75% senior unsecured notes
of $235 million due 2016 (from LGD5, 82%)
Senior secured 9.25% notes of $228 million due 2015
to B1 (LGD3, 38%) from Ba3 (LGD2, 27%)
SGL-2 Speculative Grade Liquidity Rating
Moody's will withdraw the ratings of Axcan's Term Loan A upon repayment,
as well as Axcan's existing revolving credit facility due 2014 upon
close of the transaction, subject to the review of documentation.
For additional information please refer to Moody's updated Credit
Opinion on Axcan Intermediate Holdings, Inc. available on
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 Delaware, Axcan Intermediate Holdings Inc.
is the parent of Axcan Pharma Inc., based in Mont St-Hilaire,
Quebec, and Axcan Pharma US, Inc., based in Bridgewater,
NJ. Axcan is a specialty pharmaceutical company concentrating in
the field of gastroenterology with operations in North America and Europe.
Axcan had revenue of approximately US$355 million for the twelve
months ended September 30, 2010.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, confidential
and proprietary Moody's Investors Service information, and
confidential and proprietary Moody's Analytics 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
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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.
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 rates Axcan's new sr. secured debt B1; confirms B2 CFR
250 Greenwich Street
New York, NY 10007
No Related Data.
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