Research Update: Aegis Toxicology Sciences Corp. Downgraded To 'CCC+' And Placed On CreditWatch Negative On Elevated Refinancing Risk

Nashville, Tenn.-based Aegis Toxicology Sciences Corp.'s $168 million term loan comes due in less than 12 months. Given the company's persistent cash flow deficits and the significant decline in its COVID-19-related revenue, as well as its high leverage and very limited liquidity (with no revolver), we view it as facing elevated refinancing risk. We expect Aegis will significantly improve its EBITDA margin in 2024 as it focuses on reducing costs and improve efficiencies from its new laboratory. However, we anticipate the company will likely continue to generate free cash flow deficits over the next 12 months. Therefore, we lowered our issuer credit rating on Aegis to 'CCC+' from 'B-' and our issue-level rating on its first-lien term loan to 'CCC+'

...- Nashville, Tenn.-based Aegis Toxicology Sciences Corp.'s $168 million term loan comes due in less than 12 months. Given the company's persistent cash flow deficits and the significant decline in its COVID-19-related revenue, as well as its high leverage and very limited liquidity (with no revolver), we view it as facing elevated refinancing risk. - We expect Aegis will significantly improve its EBITDA margin in 2024 as it focuses on reducing costs and improve efficiencies from its new laboratory. However, we anticipate the company will likely continue to generate free cash flow deficits over the next 12 months. - Therefore, we lowered our issuer credit rating on Aegis to '###+' from 'B-' and our issue-level rating on its first-lien term loan to '###+' from 'B-'. At the same time, we placed all of our ratings on the company on CreditWatch with negative implications. - The CreditWatch placement reflects heightened risk of default if the company is not able to successfully refinance their...

Research Update