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Fitch raises Avantor's long-term issuer default rating on debt reduction

Fitch Ratings upgraded Avantor Inc.'s long-term issuer default rating to B+ from B following the company's debt reduction through funds generated from its recently closed IPO.

The outlook on the rating is positive for the Radnor, Pa.-based laboratory equipment and chemicals manufacturer.

Fitch said the company's decision to reduce its debt resulted in gross debt to EBITDA ratio — a measurement of the income generated and available to pay down debt before certain items — of about 5.7x following the IPO.

Earlier in May, Avantor sold 238,050,000 common shares at $14 apiece in its IPO to raise about $3.33 billion in gross proceeds. The company also closed a concurrent public offering of 20.7 million shares of its 6.250% series A mandatory convertible preferred stock. In total, Avantor raised about $4.24 billion in net proceeds.

The company used parts of the proceeds to repay $1.02 billion and $582 million under its senior secured dollar term loan facility and euro term loan facility, respectively.

Fitch said the upgrade was also supported by Avantor's continued strong operating performance and deal synergies related to the acquisition of Germany-based VWR International GmbH, a supplier of ultra-high-purity materials and solutions for life sciences and technology markets, in 2017. The acquisition reflected an enterprise value of about $6.5 billion for VWR.

The rating agency said the positive outlook reflects an expectation that Avantor could maintain a credit profile supporting a higher rating than B+, while also incorporating targeted acquisitions in its forecast.