Standard & Poor’s and Fitch have dealt Grifols another setback this Thursday by cutting the credit ratings they previously held for the pharmaceutical group. The agencies argue they doubt the company can meet two 1.8 billion dollar debt maturities due in 2025, to which Grifols responded with a statement to the National Securities Market Commission. “We expect to meet our 2025 maturities efficiently in the first half of 2024,” the note reads. After this downgrade, the stock again declined, trading at 17:11 with an 8.68% drop. Shares had fallen as much as 10% at certain moments during the session. The plasma-derived medicine group has shed more than half its value year to date and is approaching the seven euro per share lows seen last week ahead of its auditor KPMG’s unconditional approval of the accounts.
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Standard & Poor’s Global Ratings has lowered Grifols’ rating from B+ to B, placing its outlook on watch with negative implications due to weaker free cash flow generation and refinancing risks for the plasmas company in a context defined by the crisis sparked by the short-seller Gotham City Research. The ratings agency highlighted that Grifols posted weaker free cash flow and a higher-than-expected 2023 leverage, signaling that the firm could face negative free cash flow and EBITDA margins below expectations in 2024. As a result, S&P explained that Grifols’ leverage could rise to about 6.6 times by late 2024, up from the previous forecast of around 5.6 times, even with the income from its Haier agreement.
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Further downgrades
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Meanwhile, Fitch cut its long-term rating to B+ from BB-. Like S&P’s analysts, Fitch observers also hinted at the possibility of another downgrade, removing the negative outlook on Grifols’ rating. They point to high debt levels and free cash flow generation as reasons for the downgrade, noting that the downgrade reflects a slower debt reduction than expected in 2023 and 2024.
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The company informed the CNMV in a formal statement about the decisions reached by both rating agencies and argued that selling its unit in China would bring 1.8 billion dollars of revenue. “Executing these commitments will help Grifols reach leverage levels that should support an improvement in the agencies’ ratings,” the company states.