Moody’s drops Perrigo view to negative

Moody's Investors Service said it affirmed the Baa3 senior unsecured ratings of Perrigo Co. plc and related subsidiaries and revised the outlook to negative from stable.

"Perrigo's operating underperformance, combined with debt-funded acquisitions and share repurchases over the last 12 months has led to persistently elevated leverage," Moody's senior vice president Jessica Gladstone said in a news release.

"Further, while Perrigo appears committed to deleveraging through debt repayment, we believe event risk is rising given Perrigo's on-going operating challenges and the significant contraction in equity market valuation in recent months."

The change in outlook to negative reflects Moody's view that leverage will remain around 4 times in the near-term and that deleveraging will be dependent on debt repayment as earnings growth has stalled.

The negative outlook also reflects the agency’s view that if underperformance continues, it raises the risk that the company pursues larger-scale changes in strategy, which could be detrimental to creditors.

Further, Moody’s added that the negative outlook incorporates increasing reliance on Tysabri royalties to generate cash flow.

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