Moody's prunes Perrigo

Moody's Investors Service said it downgraded Perrigo Co. plc’s ratings, including the corporate family rating to Ba2 from Ba1, probability of default rating to Ba2-PD from Ba1-PD, and senior unsecured notes ratings to Ba3 from Ba2. Moody's also lowered the ratings of the senior secured revolver and term loans issued by Perrigo Investments LLC, a subsidiary of Perrigo Co., to Ba1 from Baa3. Perrigo's speculative grade liquidity rating was unchanged at SGL-3.

“The ratings downgrade reflects that Perrigo's deleveraging progress is slower than Moody's previous expectation and the company's low projected free cash flow for 2023. Slower-than-anticipated revenue growth and margin improvement led to considerably lower free cash flow in 2022 and debt-to-EBITDA leverage above 6x as of December 2022 (gross leverage pro forma for a full year of earnings from the HRA and Gateway acquisitions). Revenue and EBITDA were below Moody's and the company's expectations partly due to foreign currency headwind, higher input and freight costs, plant shutdown in the Vermont facility, as well as supply chain disruptions and labor shortage, which led to capacity constraints to meet consumer demand,” the agency said in a press release.

Moody's said it now sees it taking until 2025 before Perrigo can reduce its debt to EBITDA to below 4.5x until 2025, two years behind the agency’s previous expectations.

The outlook remains negative.

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