OREANDA-NEWS. S&P Global Ratings today assigned its 'BBB-' senior secured debt rating and '1' recovery rating (indicating expectations for very high [90%-100%] recovery in the event of a payment default) to U. S.-based specialty and generic pharmaceutical company IMPAX Laboratories Inc.'s $600 million senior secured credit facilities, consisting of a $400 million term loan A and an upsized $200 million revolving credit facility both due Aug. 3, 2021.

At the same time, we lowered our unsecured issue-level rating on the company's $600 million senior unsecured convertible notes due June 15, 2022, to 'BB-' from 'BB' and revised the recovery rating to '5' from '3'. The '5' recovery rating indicates our expectation for modest (10%-30%; upper half of the range) recovery in the event of a payment default.

The company used proceeds from the term loan to partially fund its acquisition of a portfolio of generic products from Teva Pharmaceutical Industries Ltd. and affiliates of Allergan PLC for $586 million.

The transaction does not affect our 'BB' corporate credit rating on IMPAX, as pro forma leverage of under 4.0x remains within our projected leverage for the company. In the meantime, the addition of the acquired generic drugs further increases the diversity of IMPAX's drug portfolio.

For the corporate credit rating rationale, see the research update on IMPAX published Sept. 15, 2015.

RECOVERY ANALYSISKey analytical factors:The company's capital structure consists of a $200 million secured revolving credit facility, a $400 million secured term loan, and $600 million of unsecured convertible notes. Simulated default assumptions:We estimate that for the company to default, EBITDA would need to decline more than 50%, representing a dramatic deterioration from the current state of its business. If a default occurs, we expect the company would reorganize. Our simulated default scenario contemplates a default in 2021, stemming from a combination of heightened competition and poor operating performance. We assume an 85% drawn revolver and an increase of more than 400 basis points in borrowing costs arising from a combination of LIBOR and margin increases following covenant violations. Simplified waterfall:EBITDA at emergence of $115.7 million Our valuation assumes an EBITDA multiple of 6x Gross enterprise value (EV): $694 million. Net EV (after 5% administrative costs): $660 millionValuation split (obligors/non-obligors): 100%/0%Collateral value available to secured creditors: $660 millionSecured first-lien debt (revolver and term loan): $541 million--Recovery expectations: 90% to 100% Unsecured debt: $606 million--Recovery expectations: 10% to 30%Note: All debt amounts include six months of prepetition interest.