NEW YORK (GenomeWeb News) – Moody's Investors Service has upgraded $2.3 billion of Life Technologies' Senior Unsecured Notes to investment grade from speculative grade.
The ratings agency made the upgrade yesterday and changed the rating outlook for Life Tech to Stable from Positive.
The changes reflect Life Tech's continued reduction in financial leverage and debt repayment since its purchase of Applied Biosystems in 2008, Moody's said. Life Tech emerged from the merger of ABI and Invitrogen.
In a statement, Jessica Gladstone, Moody's vice president and a senior analyst, said, "The upgrade also reflects the company's continued stable operating performance and strong free cash flow despite headwinds in the academic research market, as well as clearly articulated financial targets including debt/EBITDA between 2.0 to 2.5 times."
In improving Life Tech's grade to Baa3 from Ba1, Moody's also said that the Carlsbad, Calif.-based firm has leading positions in many of the markets it serves, favorable scale, and a diverse customer base, product portfolio, and geography. Moody's added that with 80 percent of its revenues derived from reagents, consumables, or services, the company has a high percentage of recurring revenues.
The ratings firm, however, noted Life Tech's high exposure to the academic/government end markets, "which face budget uncertainty over the next 12-24 months and will likely constrain organic growth."
The company also "operates in a consolidating industry with technology obsolescence risk," Moody's said. "These factors could lead [Life Tech] to be more aggressive in terms of acquisitions or share buybacks."
The notes that were upgraded include: $250 million that are due 2013; $500 million due 2015; $400 million due 2016; $750 million due 2020; and $400 million due 2021.
A month ago, Fitch Ratings affirmed its 'BBB' issuer default rating on the firm.