NICE Investors Service: "Samsung Biologics Spin-Off... Limited Impact on Credit Rating"

On May 23, NICE Investors Service stated that the impact of the spin-off of Samsung Biologics on its credit rating would be limited.

On the previous day, May 22, Samsung Biologics announced its plan for a spin-off. The company will separate its biopharmaceutical development and commercialization business to establish a new entity, Samsung Episholdings. The surviving entity, Samsung Biologics Co., Ltd., will continue to operate its biopharmaceutical contract development and manufacturing organization (CDMO) business. Samsung Episholdings will serve as a holding company, fully owning Samsung Bioepis and new subsidiaries engaged in bio-related businesses, and will be responsible for managing subsidiaries and making new investments.

NICE Investors Service explained that there would be no immediate change in the credit rating of the corporate bonds issued prior to the spin-off. The agency stated, "In the case of a spin-off, both the surviving company and the newly established company are jointly liable for the debts of the pre-spin-off company under the Commercial Act," and added, "There is no change in the repayment capacity of the hypothetical consolidated entity, and the credit rating of the existing corporate bonds will remain the same."

The agency also assessed that the impact of the spin-off on the company's credit rating would be limited, stating, "After the spin-off, the company's sales scale is expected to decrease by approximately 23% compared to before the spin-off." However, it also noted, "As PPA amortization expenses and other costs will be attributed to the new entity, the company's profit-generating capacity is expected to remain at a strong level."

However, NICE Investors Service pointed out that the degree of deterioration in the company’s financial stability indicators in the finalized post-spin-off financial statements, as well as changes in sales, profitability, and cash generation, and any modifications to future investment plans, could affect the credit rating. The agency stated, "The company's financial condition may change at the time of the final spin-off, and additional changes may occur during the business adjustment process of the spun-off division," adding, "We will continue to monitor developments related to the spin-off, including the results of the upcoming extraordinary shareholders' meeting and any changes in financial stability during the spin-off process, and will reflect these in the credit rating as necessary."