(Alliance News) - Moody's Investors Service on Monday affirmed GlaxoSmithKline PLC's and its financing subsidiaries' A2 long-term senior unsecured ratings.
The outlook remains negative, the ratings agency noted.
"Today's affirmation reflects the large size and leading positions that GSK will retain following the separation of its Consumer Healthcare segment in 2022 as well as our view that the group's diversity, albeit reduced, will remain high and supported by low concentration on top products," said Frederic Duranson, a Moody's assistant vice president & lead analyst for GSK.
Moody's explained that the future separation of Consumer Healthcare will reduce the FTSE 100-listed pharmaceutical company's size and diversity.
What remains will be the more research & development-intensive and more volatile Pharmaceuticals & Vaccines segments which have a higher business risk profile, Moody's noted.
However, Moody's said GSK will remain one of the most diversified pharmaceuticals companies globally with leading positions in areas such as HIV and vaccines.
The negative outlook primarily reflects Moody's expectation that GSK's credit metrics will remain weak for the rating category prior to the separation of Consumer Healthcare as well as uncertainty around the magnitude of deleveraging that GSK's creditors should expect upon the de-merger.
Moody's also said it estimates that the separation of Consumer Healthcare will lead to a loss in annual free cash flow between GBP1.0 billion and GBP1.5 billion.
"While we expect that a dividend cut will absorb the lost free cash flow initially, the negative outlook continues to reflect a degree of uncertainty on the extent of deleveraging," added Duranson.
GSK shares closed 0.5% lower in London on Tuesday at 1,271.24 pence each.
By Evelina Grecenko; evelinagrecenko@alliancenews.com
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