Research Update: Bausch Health Cos. Inc. Outlook Revised To Negative Given Higher Opening Leverage Upon Spin-Off

Bausch Health Cos. Inc. (BHC) today raised its leverage target for Bausch Pharma (the remaining entity after the company's proposed spin of its eye-care business), to ~6.5x-6.7x at the time of the proposed spin-off, roughly 1x higher than the previous target of mid-5x. S&P Global Ratings is affirming the 'B+' issuer credit rating on BHC and revising our outlook to negative from stable. This is driven by a combination of higher-than-expected opening leverage and a less diversified business mix for Bausch Pharma. Bausch Pharma is a weaker business without the eye-care business, in our view. The high product concentration and an unproven pipeline lead us to believe Bausch Pharma will likely resort to acquisitions in the coming years to diversify.

...- Bausch Health Cos. Inc. (BHC) today raised its leverage target for Bausch Pharma (the remaining entity after the company's proposed spin of its eye-care business), to ~6.5x-6.7x at the time of the proposed spin-off, roughly 1x higher than the previous target of mid-5x. - S&P Global Ratings is affirming the 'B+' issuer credit rating on BHC and revising our outlook to negative from stable. This is driven by a combination of higher-than-expected opening leverage and a less diversified business mix for Bausch Pharma. Bausch Pharma is a weaker business without the eye-care business, in our view. The high product concentration and an unproven pipeline lead us to believe Bausch Pharma will likely resort to acquisitions in the coming years to diversify. - Partially offsetting these negative developments are Bausch Pharma's sizable scale and solid free cash flow generation ability. - The negative outlook reflects the possibility for a one-notch downgrade when the company consummates the spin-off...

Research Update