Moody's changes inVentiv's outlook to negative; B3 CFR
New York, April 13, 2012 -- Moody's Investors Service changed the rating outlook of inVentiv Health Inc. ("inVentiv") to negative from stable. The Corporate Family Rating and Probability of Default Rating remain B3 and the Speculative Grade Liquidity Rating remains SGL-3. The senior secured debt remains rated B1 and the unsecured notes remain rated Caa2.
The negative outlook reflects inVentiv's continued challenges in its clinical contract research organization (CRO) business including the assets acquired in the PharmaNet and i3 acquisitions in 2011. Given both industry wide headwinds, such as pricing pressure, as well as inVentiv specific challenges, such as integration and project delays, Moody's is concerned about continued underperformance of that business.
The outlook change also reflects Moody's expectation of near-term weakening of liquidity. While the company had a strong cash balance ($109 million) at the end of December 2011, Moody's anticipates significant cash burn in the first half of 2012 due to the timing of bond payments, credit amendment fees, cash severance and costs to achieve synergies, bonuses and acquisitions. While Moody's expects near-term weakening of liquidity, it is still expected to be adequate over the next twelve months, supported by the recent covenant amendment and availability under the revolver.
For further information, please see Moody's credit opinion on inVentiv on www.moodys.com.
RATINGS RATIONALE
The B3 Corporate Family Rating reflects inVentiv's high adjusted financial leverage and limited near-to-medium term free cash flow expectations. The ratings are also constrained by a number of risks inherent in the business including: project cancellations due to FDA non-approval decisions or generic competition of clients' products, reduced client marketing budgets, and pharmaceutical industry consolidation.
Positive factors supporting the ratings are the significant size and scale of inVentiv, both on an absolute basis and relative to other CROs. The ratings are further supported by the breadth of inVentiv's diverse service offerings, which over time could result in increased cross-selling opportunities and stronger client relationships.
The ratings could be upgraded if the company is able to successfully grow revenue and improve profitability in the clinical business. If inVentiv sustains positive free cash flow and adjusted leverage (including Moody's standard accounting adjustments) below 6.0 times Moody's could upgrade the ratings.
If inVentiv is not able to improve performance in the clinical business or there is deterioration in the commercial business such that adjusted leverage is expected to remain well above 7.0 times, Moody's could downgrade the ratings. Any further weakening of liquidity may also lead to a downgrade.
The principal methodology used in rating inVentiv Group Holdings was the Global Business & Consumer Service Industry Rating Methodology published October 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA, published June 2009.
inVentiv, headquartered in Burlington, Massachusetts, is a leading provider of outsourced services to the pharmaceutical, life sciences and healthcare industries. inVentiv provides a broad range of clinical development, communications and commercialization services to clients to assist in the development and commercialization of pharmaceutical products and medical devices. For the twelve months ended December 31, 2011, the company reported approximately $1.4 billion in net revenues. In August 2010, inVentiv was taken private by Thomas H. Lee Partners and Liberty Lane Partners in a transaction valued at $1.1 billion.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.
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Jessica Gladstone
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
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Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
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