Home |  Products |  Bios |  News |  Contact Us |  FAQ
  Independent Research on Corporate Bonds Since 1994 Preferences|Login


Teva Pharmaceuticals 04-19 16:44 GMT
(Comment)
Teva announced it is terminating its over-the-counter medicines joint venture with...
Corporate Development by Carol Levenson, CFA
Teva announced it is terminating its over-the-counter medicines joint venture with Procter & Gamble, established in 2011. At the same time, PG announced it was buying Merck Germany's consumer health business, "replacing and improving upon" the PGT Healthcare joint venture. Both sides went to great pains to say how great a performer PGT Healthcare has been. Each company will take back its own OTC products, with no material financial impact. Teva will combine these asset with those purchased from Actavis, and will seek to enhance synergies between its OTC business and its generics business. Reading between the lines regarding this curious announcement, we wonder whether PG's desire to spend EUR3.4 billion for Merck Germany's consumer healthcare business was just too ambitious for Teva to consider co-funding via the joint venture at this time, when it is trying to reduce its debt load. We'll probably never learn the whys or wherefores. But we believe the dissolution of this $1 billion joint venture is immaterial to the credit profile.
Allergan 04-19 15:32 GMT
(Comment)
The plot thickens. Allergan has confirmed press reports that it is "in the early stages of" considering...
Takeover Battle by Carol Levenson, CFA
The plot thickens. Allergan has confirmed press reports that it is "in the early stages of" considering a counteroffer for Shire plc, which has rejected three cash and stock offers from Takeda. Too bad it didn't think of this after it sold its generics business to Teva and it was flush with cash, before returning much of it to shareholders. Under UK takeover laws, Allergan must make a definitive offer by May 17 or walk away. Allergan ended 2017 with debt/EBITDA of more than 3.5x and marginally investment grade credit ratings and is not in the greatest shape to fund an acquisition of Shire using what is likely to be a material amount of borrowed cash. Even if Allergan decides not to make an offer for Shire, the fact that management is willing it to consider it while its balance sheet is already stretched is concerning. The risk of a major leveraging acquisition underpins our "deteriorating" credit score and "underperform" on Allergan bonds. UPDATE: A few hours later, Allergan issued a two sentence statement saying it would not be bidding for Shire and would continue to evaluate a "full range" of strategic options. This does not afford us much reassurance.
Shire plc 04-19 14:49 GMT
(Comment)
After word leaked to the press both Takeda and Shire disclosed that Takeda had made one or more...
Takeover Battle by Carol Levenson, CFA
After word leaked to the press both Takeda and Shire disclosed that Takeda had made one or more proposals to Shire. According to Shire, Takeda made three "conditional" proposals on March 29, April 11, and April 13, all of which it rejected as "significantly" undervaluing the company. Takeda confirmed the third proposal, which was for GBP46.50/share. This is only a 2% increase from its second proposal, which in turn was a 3% increase from its first proposal. We note with alarm, however, that the cash portion increased with each proposal, rising to 38% of the purchase price in the third proposal. These bids came in higher than our initial hypothetical scenario, which was at a 30% premium to the unaffected share price (please see our comment dated 3/28/18). But the cash portion is somewhat lower than we had assumed, so the borrowed amount is about the same. Thus our initial "back of the envelope" pro forma leverage estimate of well over 5x (before synergies) still looks valid. Although Takeda is a high quality name, its target of "investment grade" gives it plenty of room for significant downgrades. We believe the rejected bids take Takeda close to the edge of investment grade, and it will need to raise its offer (probably by raising the cash portion again) in order to prevail. Both companies said discussions are ongoing. We reiterate our "underperform" on Shire.
Laboratory Corporation of America 04-19 02:51 GMT  
(Report with Analyst's Data Sheet) 
The legal battle between the clinical laboratory testing trade group and Health and Human Services over the Protecting Access to...
PAMA Again by Carol Levenson, CFA
PAO Severstal 04-19 02:37 GMT  
(Report with Analyst's Data Sheet) 
PAO Severstal (CHMFRU) released some good results for 1Q18, in line with market expectations. With another double-digit increase in EBITDA and a continued...
Bittersweet by Alexandre Dray
United States Steel 04-19 02:22 GMT  
(Report with Analyst's Data Sheet) 
Last month, U.S. Steel Corp. (X) raised its 2018 EBITDA guidance by $200 million to $1.7 billion to reflect the expected second half benefits from...
Credit Improvement  by Evan Mann, CFA
International Business Machines 04-19 02:05 GMT  
(Report with Analyst's Data Sheet) 
IBM broke a streak of 5-plus years of continuous revenue declines with a 3.6% increase in the fourth quarter. The company...
Somewhat Better, Somewhat Worse by Dave Novosel, CFA
Abbott Laboratories 04-18 17:30 GMT
(Comment)
Abbott reported strong first quarter results this morning at the high end of its...
Earnings by Carol Levenson, CFA
Abbott reported strong first quarter results this morning at the high end of its adjusted E.P.S. guidance range, and reaffirmed its full year guidance for a 14% increase in adjusted E.P.S. at the midpoint of its range. Organic sales growth was 6.9%, and adjusted earnings rose 25%, still distorted by recent acquisitions. Importantly, sales in the former laggard Nutrition segment continue to improve sequentially for the fifth straight quarter, with organic growth of 4.7% in the quarter, with pediatric nutrition sales up 5.1% on the same basis, achieving strong results in Asia, including Greater China, while gaining market share in the U.S. in infant nutrition. Diagnostics and Established Pharmaceuticals saw mid single digit organic growth, while Medical Devices saw sales increase by 9.4% on the same basis, led by 33% growth in Diabetes Care, continuing to benefit from FreeStyle Libre's success. The company's adjusted pretax margin expanded by 70 basis points to 16.6%, aided by higher gross margin and a lower R&D expense rate, somewhat offset by a higher SG&A expense rate. There was no balance sheet or cash flow information provided, and nothing new on debt reduction was discussed apart from what we already covered in our recent report (dated 4/13/18). Management said it was still committed to paying down debt and lowering leverage.
Citigroup 04-18 03:08 GMT  
(Report with Analyst's Data Sheet) 
Citigroup (C) had a strong first quarter, helped by growth in global consumer banking (revenues up 7% year-over-year) and by the recent surge in volatility, which...
Capital Returns by Kathleen Shanley, CFA
Red Rock Resorts 04-18 02:17 GMT  
(Report with Analyst's Data Sheet) 
Red Rock Resorts (RRR) formerly Station Casinos, has been reporting lackluster results despite the uptick in the economic climate, especially in the Las...
Rags To Riches by Kim Noland
Omnicom Group Inc. 04-18 01:52 GMT  
(Report with Analyst's Data Sheet) 
Coming into the first quarter earnings season, there were several reasons to be concerned about Omnicom Group. Organic revenue rose 3.1% in 2017,...
Still Adding To The Ad Game by Dave Novosel, CFA
BRF S.A. 04-18 01:35 GMT  
(Report with Analyst's Data Sheet) 
Things are not really getting better for BRF S.A. (BRFSBZ), after the announcement of the suspension, on sanitary grounds, of the production of poultry products...
Going From Bad To Worse by Cedric Rimaud, CFA
Gimme Credit Emerging Markets has just initiated coverage of GMR Hyderabad.

Tenneco 04-13 
Abbott 04-12 
Shire 03-28 
An Independent Viewpoint
Rigorous Analysis
Coverage of Key Securities
Every report is one page, and concludes with an actionable investment recommendation.
Feb 8, 2018 | Financial Times
KS on Wells Fargo - Q- "It is certainly a black eye for Wells Fargo that they have not been able to put the sales incentive scandal behind them, but the growth restrictions are a greater concern for equity investors than for bondholders."
Nov 6, 2017 | Bloomberg
CL on TEVA -Q-"We find it troubling that management, which presumably met with Fitch before the downgrade, was not able to convince the rating agency that it would take more dramatic deleveraging actions in order to preserve investment grade ratings,"
Nov 6, 2017 | Bloomberg
DN on Sprint- Q- "They don't produce enough free cash flow to cut into the debt," "The only possible way to do that is to continue cutting costs."
Oct 14, 2017 | Associated Press
PA on Pacific Gas and Electric Co.- Q- Investors "are spooked,"
Oct 12, 2017 | Reuters
KN on Toys R Us -Q- "We rated the bonds Underperform when they were trading at 95," "We are especially good at warning bondholders about deteriorating situations,"
Copyright © 2018. Gimme Credit LLC. All Rights Reserved.