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Fitch Affirms Thermo Fisher Ratings, Stable Outlook

NEW YORK (GenomeWeb) – Fitch Ratings has affirmed Thermo Fisher Scientific's ratings and its stable rating outlook.

The ratings apply to $12.5 billion of debt as of Dec. 31, 2015 and include BBB ratings for Thermo Fishers' long-term issuer default rating, senior notes, and a bank revolving credit facility; and F2 ratings for its short-term IDR and commercial paper. Fitch also affirmed a BBB rating for Thermo Fisher Subsidiary Life Technologies' long-term IDR and senior notes.

The ratings are driven by several key assumptions, including that the firm will reduce its gross debt leverage and see revenue growth between 3 percent and 4 percent over the forecast period, through the year end of 2018.

In a statement, Fitch analyst Gregory Dickerson noted that "Thermo Fisher has demonstrated solid and consistently paced improvement in credit metrics since its Life Tech acquisition, using free cash flow and proceeds from business divestitures to reduce post-acquisition debt by about $4.6 billion."

Fitch anticipates the firm will generate free cash flow of more than $3 billion, which would allow it to finance "bolt-on" acquisitions and finance share repurchases of $1 billion.

Fitch also noted that the Life Tech acquisition was "proceeding smoothly," especially since Thermo Fisher has raised its target for cost synergies, reporting $130 million of realized cost synergies in 2015, above the original 2015 synergy target of $115 million.   

Dickerson cited aggressive capital management as Thermo Fisher's key credit risk, not operating risk. Capital deployment "has occasionally contributed to higher debt levels and deterioration of credit metrics," he wrote.

Fitch upgraded Thermo Fisher's rating outlook to stable in December 2014.

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