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Fitch Upgrades CFR Pharmaceuticals' Debt; Removes Rating Watch Positive
[January 29, 2015]

Fitch Upgrades CFR Pharmaceuticals' Debt; Removes Rating Watch Positive


Fitch Ratings has upgraded CFR Pharmaceuticals' (CFR) Issuer Default Ratings and its senior unsecured ratings and removed them from Rating Watch Positive. Fitch has also affirmed the ratings of the No. 730 and 731 bond programs, and downgraded CFR's National Equity Rating from Primera (News - Alert) Clase Nivel 3(cl) to Primera Clase Nivel 4(cl) due to the substantial reduction in the outstanding float of the company's shares after Abbott's takeover.

A full list of rating actions follows at the end of this release.

Fitch placed CFR on Rating Watch Positive on May 19, 2014. The action followed the announcement that Abbott Investments Luxembourg S.A.R.L., a subsidiary of Abbott Laboratories (Abbott; 'A+'/Outlook Negative), had entered into a definitive agreement to acquire 72.62% of CFR's issued and outstanding shares from its controlling shareholder and would conduct a public cash tender offer for all of the outstanding shares of CFR. Close to 100% of CFR's publicly-held shares were tendered for a total purchase price of approximately USD2.9 billion, plus the assumption of net debt of approximately $430 million when the transaction closed at the end of September 2014.

Fitch believes Abbott's acquisition of CFR makes sense strategically, as it would increase Abbott's strong position in the fast-growing Latin American branded generic pharmaceutical market. CFR's geographic presence and product portfolio complement Abbott's portfolio; CFR has a strong presence in Chile, Colombia, and Peru whereas Abbott's is in Brazil and Mexico. Abbott expects CFR to contribute about USD900 million to its annual sales in 2015. Abbott reported revenues of USD22 billion in 2013 and EBITDA of USD5 billion.

KEY RATING DRIVER

Abbott Laboratories as Parent

The operation and strategic links between CFR and its parent, Abbott, are strong and in accordance with Fitch's Parent and Subsidiary Rating Linkage its ratings have been equalized. In recent months, Abbott has taken steps to fold CFR into Abbott's operations. Abbott's subsidiary, Abbott Laboratories (Chile) Holdco (Dos) SpA, has purchased 100% of CFR's local bond issuances in Chile as well as 98% of the senior unsecured notes issued by CFR International SpA (CFRI) through separate tender offers and related consent solicitations. Abbott has also provided a full guarantee of payment on series C and D of the local issuances. CFR had approximately USD532 million of debt at Sept. 30, 2014. The majority of its debt is comprised of the USD300 million bond issued by CFRI in December 2012 and local currency denominated issuances totalin about USD181 million; the remaining debt is related to working capital lines with local banks.



RATING SENSITIVITIES

A downgrade of Abbott's ratings would result in a negative rating action on CFR's international ratings, while the national scale ratings would likely remain unchanged with a one-notch downgrade on the international scale. A positive rating action is not likely in the near term.


Fitch has taken the following rating actions:

CFR Pharmaceuticals S.A.

--Long-term IDR upgraded to 'A+' from 'BBB-'; Outlook Negative;

--Local currency long-term IDR upgraded to 'A+' from 'BBB-'; Outlook Negative;

--National long-term rating upgraded to 'AAA(cl)' from 'A(cl)'; Outlook Stable;

--Series A, B and E upgraded to 'AAA(cl)' from 'A(cl)'; Outlook Stable;

--Series C and D (guaranteed by Abbott) affirmed at 'AAA(cl); Outlook Stable;

--Bond programs No. 730 and 731 affirmed at 'AAA(cl); Outlook Stable.

CFR International SpA

--Notes due in 2022 upgraded to 'A+' from 'BBB-'.

Fitch has downgraded the following rating:

CFR Pharmaceuticals S.A.

--National Equity Rating to 'Primera Clase Nivel 4(cl)' from 'Primera Clase Nivel 3(cl)'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (May 28, 2014);

--'National Scale Ratings Criteria' (Oct. 30, 2013);

--'Metodologia de Clasificacion de Acciones en Chile' (July 3, 2013).

Applicable Criteria and Related Research:

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

National Scale Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720082

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=978841

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.


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