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S&P assigns Diplomat B+ corporate credit rating

S&P Global Ratings assigned its B+ corporate credit rating to Diplomat Pharmacy Inc.

The outlook is stable.

S&P said its rating on Diplomat reflects the company's entrance into the pharmacy benefit manager market via the acquisition of LDI Integrated Pharmacy Services.

The rating agency believes the transaction will increase the company's adjusted leverage to be in the high-4x area for the last 12 months ended Sept. 30, compared to the low-1.0x area historically.

S&P expects leverage to decline to 3.9x in 2018 through a combination of EBITDA growth and debt repayment. Leverage could continue to decline in 2019 and management has stated that it would lower its total leverage to between 2.0x and 3.0x by mid-2019.

However, the agency believes that there is some risk that the company may pursue additional debt-funded acquisitions to boost its topline growth.

The stable outlook reflects the agency's expectation that Diplomat will successfully integrate the acquisitions, manage reimbursement pressure and maintain margins in the low-3% area. It also assumes that the company will direct its excess cash flow to repay its revolver balance and bring the adjusted leverage down to below the 4x area by the end of 2018.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.