Wednesday February 6, 4:48 pm Eastern Time
TEXT-S&P may cut Elan Corp Plc ratings
(UPDATE: Press release provided by Standard & Poor's)
NEW YORK, Feb 6 - Standard & Poor's today placed all of its ratings on Elan Corp. PLC (NYSE:ELN - news) on CreditWatch with negative implications (see list below). The actions were taken following Elan's announcement of higher-than-expected R&D and marketing expenditures, and the possibility of
slower-than-expected product sales growth. The company also announced that it plans to pursue further product acquisitions.
Elan continues to maintain a significant level of financial flexibility. Including amounts held in the off-balance sheet (for U.S. GAAP purposes), Qualified Special Purpose Entities (EPIL II and III), Elan has cash and investments of over $3.8 billion, which exceeds the company's $3 billion in debt.
Elan may utilize a significant portion of its financial flexibility, given its announced plans to raise R&D expenditures, expand its U.S. and European marketing infrastructures, and pursue further acquisitions. Elan has historically used a significant amount of equity financing for its acquisitions, but, with the recent steep decline in its equity share price, Elan may have to use a higher percentage of cash financing for its future transactions. Elan also said that product sales growth may slow, due to delays in obtaining FDA product approvals.
Standard & Poor's intends to assess Elan's projected financial flexibility and its levels of sustainable funds from operations, especially given recent questions regarding the company's accounting of R&D revenues, before resolving the CreditWatch.
Ratings Placed on Creditwatch Negative
Elan Corp. PLC Rating
Corporate credit rating BBB
Senior unsecured debt BBB
Subordinated debt BBB-
Athena Neurosciences Finance LLC
*Senior unsecured debt BBB
Dura Pharmaceuticals Inc.
Subordinated debt BBB-
Elan Finance Corp. Ltd.
*Subordinated debt BBB-
Elan Pharmaceutical Investments II Ltd.
*Subordinated debt BBB-
Elan Pharmaceutical Investments III Ltd.
*Subordinated debt BBB-
*Guarantor: Elan Corp. PLC |
