Moody's: Pharma firms' ratings could be under pressure
Ratings agency Moody's has announced that certain European pharmaceuticals companies' ratings could be pressured by resumed share buy-backs.
Ratings agency Moody's has announced that certain European pharmaceuticals companies' ratings could be pressured by resumed share buy-backs.
Four of the largest pharma groups, namely AstraZeneca, GlaxoSmithSkline (GSK), Novartis and Sanofi, could all be at risk after they re-started share buy-back schemes following a period of consolidation and a series of mergers and acquisitions.
Moody's said: "AstraZeneca intends to make $4.5bn worth of share buybacks this year, an amount that exceeds our current expectation for its post-dividend free cash flow generation in 2012 - approximately 2.5bn.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
"Negative pressure on AstraZeneca's rating or outlook could build if sizeable buybacks combined with earnings erosion lead its financial profile to weaken.
Meanwhile, the agency said that share buy-backs combined with other large cash outflows could cause GSK's financial profile to weaken, resulting in rating pressure. "However, GSK has provided a monetary range for its repurchases, enabling it to retain a degree of flexibility if conditions change."
The agency is of the opinion that the firms' European counterparts are likely to make fewer share buy-backs.
"In general, most rated industry players are keen to keep a Prime-1 short-term rating so that they can access the debt markets easily and cover any unexpected payments. Because a Prime-1 rating hinges on an issuer's ability to maintain a long-term rating of at least A2 or higher, we would not expect companies to undertake substantial share repurchases that could potentially jeopardise this."
NR
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.
-
‘Inheritance tax insurance’ enquiries are soaring – but is it worth it?
Premiums for whole of life insurance can run to £5,000 a month to cover a £300,000 inheritance tax bill, with policies costing more the older you take them out.
-
MPs warn over Lifetime ISAs which could leave savers out of pocket
The Treasury Committee has highlighted confusion around the Lifetime ISA withdrawal charge, which risks consumers losing “a significant part of their savings”