Moody’s has decided to place Grifols’ rating under review for a potential downgrade due to weaker cash generation and delays in publishing its audited accounts, according to the rating agency in a report released on Tuesday.
Grifols currently holds a corporate family rating of B2, with the previous outlook described as negative. Corporate family ratings are Moody’s tool for entities in the speculative grade, focusing on a company’s ability to meet its financial obligations without regard to the specific types of debt. This framework helps investors gauge overall credit risk for the issuer and is not tied to a particular debt instrument.
The rating action is also justified by the looming debt maturities Grifols faces: a bond due in February 2025, another due in May 2025, and a revolving credit facility of $1,000 million set to mature in November 2025. Such near-term obligations heighten refinancing and liquidity concerns, especially if operating cash flows remain constrained or if audit findings create further uncertainty about financial reporting and governance. (Moody’s, report published this week)
The sale of Grifols’ 20% stake in Shanghai RAAS and the repayment or refinancing of its 2025 debt load are viewed as execution risks by the agency. These moves could affect the company’s strategic flexibility and its ability to stabilize leverage, depending on market conditions and the terms of any refinancing. (Market assessment accompanying Moody’s review)
Moody’s notes that, beyond financing considerations, risk management practices, the predictability of Grifols’ earnings, and the company’s complex organizational structure have been key drivers in today’s assessment. These factors influence the overall credit risk profile and the likelihood of sustaining financial performance through potential volatility.
The review will focus on three primary areas: completion of the audit process for Grifols’ accounts, plans to address 2025 debt maturities, and the liquidity position over the next 12 to 18 months, along with an assessment of earnings and cash generation prospects for 2024 and beyond. This triad of considerations will shape Moody’s broader view of the company’s resilience and funding sustainability in the near term. (Analytical framework described by Moody’s)
As of December 31, Grifols maintained cash liquidity of €526 million, in addition to approximately €560 million accessible through the revolving credit facility of €1,000 million. These figures illustrate the company’s immediate liquidity cushion but also underscore the need for timely cash generation to support near-term obligations. (Grifols liquidity data cited by Moody’s analysis)
Grifols also reported €1,000 million in financial liabilities, comprised of €700 million in loans, €80 million in debt with GIC, and €100 million in leases. Additionally, the company faces impending payments on two bonds totaling €1,850 million next year, which could place pressure on its liquidity if cash flow does not improve. (Debt structure outlined in Moody’s briefing)
The anticipated proceeds from the Shanghai RAAS stake sale, estimated at about €1.6 billion, are expected to be used to reduce Grifols’ debt burden. The strategic deployment of these funds will be closely watched by creditors and investors as a barometer of Grifols’ ability to deleverage and restore financial stability amid broader market uncertainties. (Strategic use of proceeds noted in Moody’s commentary)