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S&P downgrades Akorn due to deterioration in operations

S&P Global Ratings lowered its corporate credit rating of Akorn Inc. to B from B+ due to deterioration in the company's operations.

The rating agency also revised the Lake Forest, Ill.-based generic-drug maker's CreditWatch placement to positive from developing.

Akorn's downgrade was based on projections of the adjusted gross leverage, or the investment strategy of using borrowed money, to be 6.5 to 7x in 2018. The rating agency said pressure on generic drugs and increasing competition across the portfolio contributed to steep revenue declines beginning in the second quarter of 2017 for the company.

S&P expects the company's revenue to decline at a rate of 12% to 14% from 2017 and EBITDA margin to decline to about 17% to 18% due to pricing pressure as well as an unfavorable product mix.

The agency revised the company's CreditWatch placement to positive because of a possibility that Fresenius SE & Co. KGaA could still acquire the company. S&P said that if the acquisition occurs, it could raise the rating as part of an evaluation of the company within the consolidated entity.

In April, Akorn filed a complaint against Fresenius in the U.S. Delaware Chancery Court asking the company to fulfill its $4.3 billion merger agreement. Fresenius decided to terminate the deal based on, among other factors, findings in its independent investigation of Akorn's operations.

The agency said it could revise the outlook to stable if Fresenius does not acquire Akorn and if the company continues to perform in line with the agency's base-case scenario.

S&P said that if Fresenius repays substantially all of Akorn's debt, it could discontinue all ratings on the company.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.