NEW YORK (GenomeWeb) – In a filing with the US Securities and Exchange Commission, Thermo Fisher Scientific announced yesterday that it will issue €600 million of floating rate Senior Notes due 2018.
The company said it expects net proceeds from the sale of approximately €597.4 million, and plans to use a portion of that money to repay all the outstanding indebtedness under the term loan facility it entered into on March 7 to help fund its acquisition of Affymetrix. Any remaining net proceeds will be used for general corporate purposes, Thermo Fisher added.
Fitch Ratings assigned a BBB rating with a Stable outlook to the senior notes offering, saying it expects the proceeds will be used to redeem the entire $600 billion principal amount outstanding under the company's term loan facility due 2016.
The agency said it has calculated that Thermo Fisher's pro forma gross leverage will be around 3.5x when the company completes its acquisition of FEI, but expects that gross leverage to return to around 3.0x within 12 months after the deal is completed later this year, "a level that Fitch views as consistent with the BBB rating."
Fitch further said that Thermo Fisher's free cash flow, which could exceed $3 billion in 2017, should be sufficient to repay debt issued to finance bolt-on acquisitions, as well as to fund share repurchases of at least $1 billion in 2016. However, the agency added that it sees the possibility of aggressive capital management as Thermo Fisher's key credit risk. "Capital deployment for acquisitions and shareholder payments has occasionally contributed to higher debt levels and deterioration of credit metrics, reducing financial flexibility in the aftermath of leveraging transactions," Fitch wrote.
The agency also noted Thermo Fisher's financial flexibility and strong liquidity as important factors supporting the investment grade credit profile. "At June 30, 2016, Thermo Fisher's sources of liquidity included $663 million of cash on hand and $2.436 billion of capacity under the $2.5 billion revolving credit facility," Fitch said. "The credit facility is back-up for the commercial paper (CP) program and if the revolver is drawn the company intends to leave an available balance at least equal to the amount of CP outstanding. At June 30, 2016, $989.4 million of CP was outstanding, down from $1.2 billion outstanding at March 31, 2016."
Fitch added that it expects the company will continue to be an active acquirer going forward.