S&P: United States Pharmacopeial Convention Inc., MD Outlook Revised To Positive On Strong Management And Governance
"The rating and revised positive outlook reflect our view that USP's management and governance are very strong, its niche business continues to benefit from global expansion opportunities while its U. S. operations retain their exclusivity and dominant position all contributing toward strong surplus operations and more than adequate expendable resources to operations and debt," said S&P Global Ratings analyst Ken Rodgers. "In addition, USP's debt burden is moderate and expected to remain so as no additional debt is contemplated over the next two years."
We also believe USP's very strong enterprise profile derives in large part from its unique business position whereby the U. S. government has ceded to USP the responsibility to set the quality standards for medicines. Furthermore, USP provides similar services worldwide.
The positive outlook reflects our view that USP's very strong enterprise profile together with its strong and improving financial profile could lead us to raise the rating over the next two years if present favorable trends in both continue.
An upgrade would be predicated upon USP's enterprise profile remaining very strong, as anticipated, and its financial profile shows further improvement, specifically, demonstrating continued strong profitability and available resources growth that is sufficient to sustain operations and capital needs while providing a stronger cushion against debt. The latter is necessary in our view given risks associated with a debt structure that has covenants that could trigger acceleration under limited circumstances.
While not expected, a revision to a stable outlook or lower rating is possible if operating earnings or available resources decline relative to debt or if debt increases significantly. Also, any significant management turnover or impairment of USP's major business lines could lead to a revision to a stable outlook or lower rating depending upon the severity of the action.