Skip to main content
Premium Trial:

Request an Annual Quote

Thermo Fisher Plans $800M Senior Notes Offering; Fitch Issues BBB Rating for Firm's Notes

NEW YORK (GenomeWeb) – Thermo Fisher Scientific today said that it plans to offer dollar-denominated senior notes to repay debt. Additionally it plans to offer euro-denominated senior notes later in the fourth quarter, subject to market conditions.

Separately, Fitch Ratings assigned a BBB rating to Thermo Fisher's senior notes.

Thermo Fisher has not yet set the terms for the offering of the dollar-denominated senior notes, but a company spokesman confirmed that the offering is for $800 million. The company will use net proceeds principally to pay back debt, including the $400 million aggregate principal amount of its 3.25 percent senior notes due 2014 that mature on Nov. 20, it said.

The senior notes included in the planned offering mature in 2022.

Thermo Fisher said that any net proceeds from its planned euro-denominated offering would also be used principally to repay debt.

Merrill Lynch, Pierce, Fenner & Smith and Mitsubishi UFJ Securities are the joint book-running managers for the dollar-denominated notes offering.

Also, Fitch today assigned a BBB rating to Thermo Fisher's proposed $800 million senior notes and said that the rating outlook is negative. The ratings apply to $14.5 billion of debt as of Sept. 27.

The negative ratings outlook reflects Thermo Fisher's aggressive use of capital during the past few years that has resulted in higher debt levels and a deterioration of credit metrics. Even before the $13.6 billion buy of Life Technologies earlier this year, Thermo Fisher had made sizeable acquisitions in 2011 and 2012, as well as a "high level of share repurchases," Fitch said.

Meanwhile, the company began paying a dividend to shareholders starting in 2012 and now spends about $240 million each year in dividend payments.

Fitch noted, however, that Thermo Fisher has suspended its share repurchase program following the Life Tech purchase and has made debt reduction the priority for cash deployment for 2014. Fitch said that the company has used about $2.7 billion of cash and asset sale proceeds to pay down debt, leaving another $1 billion in debt reduction that would need to be achieved before it meets its leverage target for 2015.

Fitch said that it believes "this amount of debt reduction is achievable, even if the company resumes share repurchases and acquisitions during 2015." It added that both Thermo Fisher and Life Tech generate "ample and consistent" free cash flow. "This provides excellent financial flexibility and is a key support of the credit profile of the combined company," Fitch said. It estimates Thermo Fisher-Life Tech will generate about $2.5 billion in free cash flow in 2015.

Fitch gave Thermo Fisher's long-term issuer default rating and senior notes a BBB rating and its short-term IDR and commercial paper each an F2 rating. The ratings firm also gave Life Tech a BBB rating for its long-term IDR and senior notes.