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Fitch Affirms & Removes CFR Pharmaceutical's Ratings from Negative Watch; Outlook Stable

February 12, 2014

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed the ratings of CFR Pharmaceutical S.A. (CFR) and has removed them from Rating Watch Negative. The Rating Outlook is Stable. A full list of ratings follows this release.

CFR's ratings were placed on Rating Watch Negative on July 3, 2013 after it announced a non-binding offer to purchase 100% of Adcock Ingram Holdings Ltd. (Adcock Ingram), a leading pharmaceutical company in South Africa, for USD1.2 billion.

KEY RATING DRIVERS

The removal of the ratings from Rating Watch Negative is a result of CFR and Adcock Ingram's mutual agreement to enter into a 'Termination Agreement' after several months of negotiation. CFR had faced opposition from Public Investment Corporation, previously Adcock Ingram's largest shareholder, and Bidvest, a rival bidder and now the largest shareholder. Both CFR and Adcock Ingram concluded that CFR's offer would not receive the necessary 75% shareholder majority.

CFR will continue to focus on growing its business both organically and inorganically. Management has signaled that they are currently searching for opportunities.

CFR's ratings continue to reflect a rapid pace of acquisitions, increasing size of acquisition targets, and improved credit metrics due to its consolidation of recent acquisition, Lafrancol. As of Sept. 30, 2013, CFR generated USD153 million consolidated EBITDA compared to USD497 million consolidated debt and USD121 million cash balance, resulting in a net debt/EBITDA of 2.4x and debt/EBITDA of 3.2x. The ratios have improved over those achieved at Dec. 31, 2012 of 3.6x and 5.2x, respectively.

RATING SENSITIVITIES

Ratings could experience downward pressure if a material acquisition increases leverage above 2.5x-3.0x net debt to EBITDA on a sustained basis, and management is unable to quickly obtain synergies to return its capital structure to targeted leverage levels below 2.5x.

Fitch removes from Rating Watch Negative and affirms CFR's ratings as follows:

--Foreign and local currency Issuer Default Rating at 'BBB-';

--Senior unsecured notes of CFR International SpA at 'BBB-';

--Long-term national rating at 'A(cl)';

--Senior unsecured national debt at 'A(cl)';

--National Equity Rating Primera Clase Nivel at '3(cl)'.

The Rating Outlook is Stable.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2013);

--'National Scale Ratings Criteria' (Oct. 30, 2013);

--'Parent and Subsidiary Rating Linkage' (Aug. 5, 2013).

Applicable Criteria and Related Research:

Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

National Scale Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720082

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=820393

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst:

Cristina Madero, +1-312-368-3060

Associate Director

Fitch Ratings, Inc.

70 W. Madison St.

Chicago, IL 60602

or

Secondary Analyst:

Monica Coeymans, +56-2-499-3314

Director

or

Committee Chairperson:

Rina Jarufe, +56-2-2499-3310

Managing Director

or

Media Relations:

Elizabeth Fogerty, +1-212-908-0526

elizabeth.fogerty@fitchratings.com

Source: Fitch Ratings


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