Moody's rates Harlan Sprague debt B2

Moody's Investors Service said it assigned first-time ratings to the proposed debt of Harlan Sprague Dawley Inc., including a B2 $15 million senior secured revolver due 2010, B2 $15 million euro-denominated senior secured revolver due 2010, B2 $160 million first-lien senior secured term loan due 2011 and B2 corporate family rating.

The outlook is stable.

Proceeds, along with cash equity from Genstar Capital and rollover equity from the major shareholder, will be used to finance the purchase of Harlan and refinance existing net debt.

The ratings reflect Harlan's high leverage, with proposed debt almost equivalent to the company's annual revenue; low free cash flow relative to debt; competition from larger firms with greater resources and the risks of having over 60% of sales outside of the United States, the agency said.

The ratings also reflect some concern that the production and manufacture of research models runs the risk of potential contamination, which could tarnish the company's reputation, damage existing inventory, lead to additional costs and potentially result in lost orders.

Moody's said the ratings benefit from a large and growing global research and development market, an increase in the number of trials conducted, more extensive testing per compound and mandatory animal trials prior to running human clinical trials.

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