As refinancing risks ease, S&P affirms Glenmark Pharma's 'BB-' rating

The outlook on ratings is "stable". The stable outlook reflects expectation that Glenmark's operating performance will remain resilient over the next 12-18 months
Standard & Poor's ( S&P) has affirmed Glenmark Pharmaceuticals Ltd's 'BB-' rating on easing of refinancing risk following syndication of a $182.5 million term loan. It removed the rating from CreditWatch. The rating agency had placed them on CreditWatch with negative implications on July 29, 2020.

The outlook on ratings is "stable". The stable outlook reflects expectation that Glenmark's operating performance will remain resilient over the next 12-18 months.

Its ratio of funds from operations (FFO) to debt ratio is expected to stay sustainably above 20 per cent, S&P said in a statement. "We also expect Glenmark to maintain sufficient surplus cash and access to credit lines to sustain its adequate liquidity status during this period,", it added.

Glenmark's new term loan will be enough to meet its upcoming debt maturities. Refinancing risks for Glenmark have subsided with the company raising $182.5 million in November 2020 via a term loan to redeem a similar amount of its $200 million senior unsecured notes due August 02, 2021.

While Glenmark intends to refinance the balance amount in the interim, it has sufficient cash ($118 million as of Sept. 30, 2020) to repay this amount at maturity in the event it does not refinance.

Glenmark still has access to about $100 million under a revolving credit facility at subsidiary Glenmark Holding S.A. until mid-2023. This, together with its available cash, would be sufficient for Glenmark to repay about $140 million of outstanding foreign currency convertible bonds (FCCBs) that have a put option on July 28, 2021.

Resilient operating performance supports Glenmark's financial position. The company faced initial disruptions to operations and supply chain due to strict lockdowns imposed across global markets from March through June 2020. Now, the company's revenues should pick up in the rest of the year.

"We estimate Glenmark's revenues will increase 6%-6.5% in fiscal 2021 (year ending March 31, 2021) and will return to fiscal 2020 growth levels of 8% by fiscal 2022," agency added.

India and Europe will drive revenue growth for Glenmark over the next 12-18 months, largely offsetting the effects of continued price erosion of generics in the U.S. markets. These two regions contribute more than 40 per cent of the company's revenues.



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