Rating Action: Moody’s assigns Ba2 to Jazz Pharma’s new secured credit facilities; negative outlookGlobal Credit Research – 09 Apr 2021New York, April 09, 2021 — Moody’s Investors Service (“Moody’s”) assigned a Ba2 rating to the new senior secured credit facilities of Jazz Financing Lux S.a.r.l., a subsidiary of Jazz Pharmaceuticals plc (collectively “Jazz”). Moody’s also downgraded the existing senior secured credit facilities of Jazz Securities Designated Activity Company to Ba2 from Ba1. These ratings will be withdrawn at close. In addition, for administrative purposes, Moody’s is reassigning certain ratings from Jazz Securities Designated Activity Company to Jazz Pharmaceuticals plc. This includes the Ba3 Corporate Family Rating, the Ba3-PD Probability of Default Rating and the SGL-1 Speculative Grade Liquidity Rating. These ratings are being assigned at Jazz Pharmaceuticals plc and withdrawn at Jazz Securities Designated Activity Company. Following these actions, the outlook is negative. These actions conclude a rating review for downgrade initiated on February 4, 2021.The credit facilities, together with other new secured debt, cash on hand, and equity will be used to fund the acquisition of GW Pharmaceuticals along with the various fees and expenses for approximately $6.7 billion net of cash acquired.Jazz’s Ba3 Corporate Family Rating reflects the strategic benefits of the acquisition of GW Pharmaceuticals. GW’s lead product Epidiolex, a cannabinoid product approved in several rare diseases, is a high growth asset that will provide Jazz with immediate product diversification.The rating also reflects Moody’s expectation of strong deleveraging following the close of the transaction with debt/EBITDA approaching 4.0x by the end of 2022, down from approximately 7.0x pro forma at year end 2020. Moody’s version of EBITDA does not add back stock compensation expense to earnings. Deleveraging will be facilitated through strong earnings growth combined with rapid debt reduction, supported by Jazz’s good free cash flow, which Moody’s estimates at about $1 billion annually.Ratings assigned:..Jazz Pharmaceuticals plc:Corporate Family Rating, assigned Ba3Probability of Default Rating, assigned Ba3-PDSpeculative Grade Liquidity Rating, assigned SGL-1..Jazz Financing Lux S.a.r.l.Senior secured revolving credit facility, assigned Ba2 (LGD3)Senior secured term loan, assigned Ba2 (LGD3)Ratings downgraded:..Jazz Securities Designated Activity CompanySenior secured revolving credit facility downgraded to Ba2 (LGD3) from Ba1 (LGD2)Senior secured term loan downgraded to Ba2 (LGD3) from Ba1 (LGD2)Ratings withdrawn:..Jazz Securities Designated Activity CompanyCorporate Family Rating withdrawn at Ba3Probability of Default Rating withdrawn at Ba3-PDSpeculative Grade Liquidity Rating withdrawn at SGL-1 Outlook actions: ..Jazz Pharmaceuticals plc: Assigned, negative outlook ..Jazz Financing Lux S.a.r.l. Assigned, negative outlook ..Jazz Securities Designated Activity CompanyChanged to Negative from Rating Under ReviewRATINGS RATIONALEJazz’s Ba3 rating reflects the company’s position as a specialized pharmaceutical company with approximately $2.9 billion of pro forma revenue including GW Pharmaceuticals. The credit profile also reflects Jazz’s good growth prospects for the next several years and its strong market position in sleep disorder drugs, as well as a growing oncology business. Growth will be enhanced by Zepzelca in small-cell lung cancer and continued growth of GW’s Epidiolex in multiple rare diseases. The GW acquisition establishes Jazz as a leader in cannabinoid science.These strengths are constrained by Jazz’s limited scale and high revenue concentration in the Xyrem/Xywav franchise, which Moody’s estimates will make up over 50% of pro forma revenues in 2021. Authorized generic entry for Xyrem anticipated in 2023 places high reliance on successful transition of patients to Xywav, and rising commercial uptake of products like Epidiolex, Zepzelca, and Sunosi.Social and governance considerations are material to the rating. Jazz faces exposure to regulatory and legislative efforts aimed at reducing drug prices. These are fueled in part by demographic and societal trends that are pressuring government budgets because of rising healthcare spending. These risks appear highest in the US, where Jazz has substantial revenue concentration. The acquisition of GW brings new regulatory oversight and compliance risks related to responsible production due to the derivation of Epidiolex from cannabis. Among governance considerations, Jazz has historically maintained low financial leverage. Given approaching Xyrem generics, the company is willing to incur higher financial leverage in order to make acquisitions, notwithstanding a commitment to deleveraging following the GW acquisition.The Ba2 rating on Jazz’s senior secured bank credit facilities is one-notch above the Ba3 Corporate Family Rating. This reflects the seniority of the new senior secured credit facility and other new secured debt over the approximately $1.8 billion of convertible bonds in the capital structure.The proposed senior term loans are expected to have no financial maintenance covenants while the proposed senior revolving credit facility will contain a springing maximum first lien net leverage ratio and a minimum interest coverage ratio, both tested if amounts under the revolving credit facility are drawn (or if greater than $50 million in undrawn, non-cash collateralized letters of credit are outstanding). In addition, the senior credit facility contains incremental facility capacity up to the greater of $1.20 billion and 1x Adjusted Consolidated EBITDA, plus an additional amount of pari passu secured debt subject to a 4.10x pro forma First Lien Secured Net Leverage ratio (pari passu secured debt). Amounts up to 50% of LTM Adjusted Consolidated EBITDA may be incurred with an earlier maturity date than the initial term loans. The credit agreement will permit the transfer of assets to unrestricted subsidiaries, subject to certain customary limitations, including with respect to material intellectual property. Certain non-wholly owned subsidiaries are not required to provide guarantees; dividends or transfers resulting in partial ownership of subsidiary guarantors could jeopardize guarantees, but there are protective provisions that limit the release of restricted subsidiaries after the closing date. The credit agreement provides some limitations on up-tiering transactions, including a requirement that all affected lenders consent to any modifications to subordinate obligations under the credit facilities, or the liens granted in favor of the secured parties under the documents, to any other indebtedness or lien. The above are proposed terms and the final terms of the credit agreement may be materially different.The outlook is negative, reflecting the risks of commercial execution prior to authorized generic entry on Xyrem, as well as elevated financial leverage outside of Moody’s expectations for the rating. This leaves Jazz weakly positioned to absorb any unexpected operating setbacks or debt funded acquisitions.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSFactors that could lead to a downgrade include slower than expected uptake of Xywav or other new products, increased litigation exposure, or additional debt-funded acquisitions such that debt/EBITDA is sustained above 4.5x.Factors that could lead to an upgrade include greater revenue diversity arising from growth in key products, reduction in exposure to Xyrem generics, and debt/EBITDA maintained below 3.5x.Jazz Financing Lux S.a.r.l. is a Luxembourg domiciled subsidiary of Jazz Pharmaceuticals plc (collectively referred to as “Jazz”), a global pharmaceutical company with a portfolio of products that treat unmet needs in narrowly focused therapeutic areas. Pro forma for the GW acquisition, revenues in 2020 totaled approximately $2.9 billion.The principal methodology used in these ratings was Pharmaceutical Industry published in June 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1062755. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor 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_1243406.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.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK 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. Michael Levesque, CFA Senior Vice President 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 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY’S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. 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 or in preparing its Publications.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.Additional terms for Japan only: Moody’s Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody’s Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.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 JPY125,000 to approximately JPY550,000,000.MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.
Add Comment