Investing.com -- Moody’s Ratings has announced an upgrade in Grifols (BME: GRLS ) S.A.’s corporate family rating (CFR) and probability of default rating (PDR) from B3 to B2. The instrument ratings of the backed senior secured instruments issued by Grifols, Grifols World Wide Operations Ltd., and Grifols World Wide Operations USA, Inc. have also been upgraded from B2 to B1. Additionally, the instrument ratings of the backed senior unsecured instruments issued by Grifols Escrow Issuer, S.A.U. have been upgraded from Caa2 to Caa1. The outlook for all entities remains positive.
The upgrade is a reflection of Grifols’ strong operating performance, robust revenue, and profitability growth, and improved management execution, which has led to an improvement of its key credit metrics. Moody’s expects Grifols’ gross leverage to trend below 6.5x by the end of 2025 from 7x for the last twelve months to March 2025, and its EBITDA to interest expense to be around 3x in 2025. The company’s free cash flow (FCF) is forecasted to be about €250-270 million over the next 12-18 months and continued good liquidity.
The positive outlook is based on expectations that Grifols’s operating performance and credit metrics will continue to improve over the next 12-18 months. Specifically, its gross leverage is forecasted to trend towards 5.5x, with an EBITDA to interest expense above 3x, and increasing cash generation.
The B2 rating also reflects Grifols’ strong market position, scale, and vertical integration in human blood plasma-derived products, which are relevant for the industry. The rating also considers the company’s current high leverage, high capital intensity of the business, and working capital requirements which can have large swings during the fiscal year, and are important drivers of FCF.
Grifols’ liquidity is seen as good, supported by €753 million of cash balances at the end of March 2025, and a fully available revolving credit facility (RCF) of $938 million due in May 2027. The company’s next debt maturities are about €3 billion due in 2027.
The rating could be upgraded if there is a continued improvement to operating, financial performance, profitability, and cash flow generation. However, the rating could be stabilized if the expected gradual improvement of key credit metrics does not materialize over the next 12-18 months. Conversely, the rating could be downgraded if Grifols’ operating performance weakens, leading to a worsening of credit metrics.
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