January 19, 2015 / 11:41 AM / 4 years ago

Fresenius sheds 'junk' credit rating for first time

FRANKFURT, Jan 19 (Reuters) - German healthcare group Fresenius, the owner of Europe’s largest private-sector hospitals chain, received investment-grade status from a ratings agency for the first time, after recent acquisitions have spread its business risks.

The company said on Monday Standard & Poor’s upgraded its corporate credit rating from “BB+” to “BBB-“ with a stable outlook, shedding the so-called “junk” grade for the first time since rating coverage started in 2002.

The company, which makes injectable generic drugs and also controls kidney dialysis industry leader Fresenius Medical Care , had 13.8 billion euros ($16.0 billion) in net debt outstanding in September. That is more than 3.4 times its adjusted core earnings.

With stable cash flows from diversified healthcare businesses, Fresenius has been popular with investors in junk debt, getting terms usually reserved for investment grade issues. In 2009, it reopened the European high yield bond market after an 18-month shutdown in the wake of the financial crisis.

S&P said the company’s recent steps had resulted in wider diversification of risks across regions and sectors and that the rating agency had become less concerned about any aggressive takeover moves.

“Based on recent statements to us, we now see increased debt leverage through large-scale acquisitions at Germany-based health care group Fresenius SE & Co. KGaA and its subsidiary, Fresenius Medical Care AG & Co. KGaA as less likely.”

The company said the rating upgrade did not reflect any change in its acquisition or finance strategy.

The yield on Fresenius’ 300 million euro ($347.01 million) bond, maturing in 2019, declined to 0.95 percent from 1.07 percent on the news on Monday, according to Tradeweb.

According to people familiar with the matter, Fresenius had been in talks with Danone over buying the French group’s Medical Nutrition division, worth an estimated 4-5 billion euros, but Danone said in December it would keep the unit.

In recent years Fresenius bought 3 billion euros worth of hospitals from Rhoen Klinikum and blood collection equipment company Fenwal for more than $1 billion, while Fresenius Medical Care bought several medical services companies. ($1 = 0.8645 euros)

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