Moody's: Grifols outlook to negative

Moody's Investors Service said it changed the outlook on Grifols SA ratings to negative from stable.

Concurrently, the Ba2 corporate family rating, the Ba2-PD probability of default rating as well as the Ba1 senior secured and B1 senior unsecured ratings to bank and bond instruments, respectively, of Grifols and its guaranteed subsidiary were affirmed.

The action reflects moderate re-leveraging of Grifols pro-forma for the planned purchase of Novartis diagnostic units in a largely debt-funded transaction. The increase in leverage of around 0.7x to 3.9x pro-forma for this transaction and assuming comparable to Grifols profitability is above the current downgrade rating trigger of 3.5x.

Whereas Moody's acknowledges the positive impact of the purchase on Grifols' business diversification and the high cash flow generation of the target, it cautions that the pro forma leverage calculation could understate the leverage impact considering the potential of the diagnostics unit for lower growth and the prospect of a decline of the target's EBITDA over time due to the expiration of intellectual royalties in the medium term.

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