Since Quintiles went public again in 2013, the firm has bought medical device and diagnostics CRO Novella Clinical and analytics and tech consultancy firm Encore Health Resources but in rating the world’s largest clinical research organisation (CRO) ‘stable’, Standard & Poor (S&P) believes more acquisitions are to come.
“Our stable outlook on Quintiles reflects our expectation that the company will maintain leverage around 3x over time,” the agency said in a note. “This incorporates our belief that the company will continue to grow through acquisitions, as well as our expectation that leverage may temporarily increase or decrease from this level because of the timing and magnitude of acquisitions.”
The agency continued to add it believes “the CRO industry continues to consolidate and Quintiles could be involved in large-scale acquisition activity to the extent that the right strategic target was available.”
$300m securitisation facility
S&P’s upgrade from BBB to BB+ was further encouraged by recent financial movements within Quintiles, including the offering up of 13 million shares in a secondary public offering last month, resulting in around half of Quintiles' shares now being owned by outside shareholders, ie those who are not board members of execuitve managment.
This, according to S&P credit analyst Shannan Murphy, has led to “increasing confidence in the company's financial policies.”
This is backed further by a securitisation facility deal announced in an SEC filing Monday which frees up some of Quintile’s $2bn long-term debt (according to Q3 2014 results).
The securitisation, which consists of a $275m term loan and a $25m revolver issued by PNC Bank, has been assigned 'BBB' rating and '1' recovery rating by S&P, indicating expectation for very high recovery in the event of default.