S&P places Teva on CreditWatch

Teva Photo: Reuters Ammar Awad

"Teva's business is more volatile and difficult to predict than we previously believed."

Standard & Poor's (S&P) has placed Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) on "CreditWatch", following the company's announcement that it had amended the covenants on its term loans, raising leverage limits to 5.9x at the end of 2018 and 5x at the end of 2019, up from 5x and 4.5x, respectively. S&P notes that this is the second time Teva has amended its covenants in the past five months.

S&P's action is also a response to an announcement from Momenta Pharmaceuticals that it now expects to launch its generic competitor to Copaxone (Teva's multiple sclerosis drug that is a major contributor to its profits), in the first half of 2018, an entry that that the rating agency had previously expected in the second half of 2018.

"We are placing our ratings on Teva, including the 'BBB-' corporate credit rating, on CreditWatch with negative implications. The CreditWatch reflects our belief that further downward revisions to our 2018 expectations are likely, as well as our view that Teva's business is more volatile and difficult to predict than we previously believed," S&P's announcement states.

On the outlook for its rating for Teva, S&P says, ”We intend to resolve the CreditWatch placement following Teva's fourth-quarter earnings call, from which we expect additional color on expectations for Copaxone and the US generics segment. If we become more confident that Teva's business will stabilize and that the company's scale will provide a durable competitive advantage over time especially compared to other large generic competitors, we could affirm the rating and assign a negative outlook, reflecting ongoing uncertainty from the restructuring efforts. If we believe that the second generic entrant in Copaxone combined with restructuring and US generic market headwinds will make Teva's business less stable and predictable for an extended period, we could lower the rating by one to two notches, depending on our revised expectations for deleveraging over the next two years."

Published by Globes [online], Israel business news - www.globes-online.com - on February 4, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Teva Photo: Reuters Ammar Awad
Teva Photo: Reuters Ammar Awad
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