Parexel upgraded to B2 on improved business, planned debt repayment

PAREXEL International Corp.'s issuer and first-lien ratings were upgraded by Moody's today to B2 and B1, respectively, from B3 and B2, as the company has announced plans to repay debt with cash on hand and as it has completed a spinoff transaction for its Parexel Informatics and Medical Imaging business.

Meanwhile, S&P Global Ratings has affirmed its issuer rating of B- on the same spinoff and debt repayment news, while maintaining its positive outlook, reflecting the potential for a higher rating if the company sustains its business momentum for the next 12 months. It has also affirmed its senior secured rating at B-.

The issuer has a covenant-lite first-lien term loan due September 2024 (L+300, 0% Libor floor) that totaled $2.065 billion when it was issued in August 2017 to back the buyout of the company by Pamplona Capital. The term loan ticked up to a 99.75/100.25 level today, from 99.375/99.875 previously.

The issuer has a $770 million issue of 6.375% senior unsecured notes due September 2025 that were also part of the financing for the buyout of the company in August 2017. The senior unsecured notes were upgraded to Caa1 from Caa2, by Moody's and were affirmed at CCC by S&P Global Ratings.

Moody's noted in its ratings report that "the multi-quarter improvement in Parexel's earnings and bookings will be sustained into 2021," and that its leverage will be reduced with the company's plan to repay debt with cash from the balance sheet. The company had $750 million of cash on its balance sheet prior to the announced debt repayment and the Informatics separation. According to the S&P Global Ratings report, the company will repay $250 million in debt, including part of its term loan or part of its bond.

Additionally, the company has completed the separation of its Parexel Informatics and Medical Imaging business to its current sponsor, Pamplona Capital, in exchange for about $110 million in notes receivable that will be repaid by 2024.

Parexel is a global biopharmaceutical services company, providing clinical research, consulting, medical communications and technology services to the pharmaceutical, biotechnology and medical device industries.