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Biotech / Medical : Elan Corporation, plc (ELN)
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To: Icebrg who wrote (3574)11/15/2002 9:08:26 AM
From: Icebrg  Read Replies (1) of 10345
 
Comments from Goodbody Stockbrokers on Moody's downgrade.

Elan: Moody’s lowers debt rating to Caa2 from B2
Hold ian.g.hunter@goodbody.ie

 Yesterday, Moody’s lowered its debt rating for Elan to Caa2 from B2 with a negative rating outlook.
Moody’s downgrade was based on the agency’s view that Elan’s current capital structure is unlikely
to be sustainable, the company’s heavy dependency on asset sales to meet upcoming debt maturities,
uncertainty surrounding the value of assets being divested and Elan’s cash burn and acquisition costs.

 Given that the debt rating was already at B2, the downgrade to Caa2 will have little effect on Elan.
The reasons cited for the downgrade are familiar to those following Elan and encapsulate the
uncertainty surrounding the stock. The company’s main aim is the successful generation of cash
through asset disposals to service debt while retaining a core business able to support its R&D
programme.

 In contrast to Moody’s outlook, Elan remains bullish on its ability to raise its target of $1.5bn ahead
of schedule. It has already achieved a healthy price for Abelcet ($370m) and Actiq ($50m) and this
Wednesday (13 November) announced the generation of a further $100m for the reduction in royalty
rates for Avinza. This is subject to Ligand raising sufficient funds to make the cash payment.

 The next couple of substantial transactions remain critical to the recovery process. From those sales,
we can gauge whether or not Elan can maintain the recovery momentum not only in terms of value
extracted from each sale but also the timeliness of the process. They will also give some indication of
what will be left in the company post-restructuring.
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