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Reckitt Equities/Credit sell-off on NEC/Enfamil lawsuit concerns

CONSUMER STAPLES
  • RKTLN {RKT LN Equity} cash mids (A3 Pos, A- S) are moving +3-4 wider on the $60m Illinois court decision declaring its Enfamil formula failed to warn of the risk in causing NEC (disease has fatality rate of 15-40%) in premature infants.
  • For a snapshot; it has £1.4b in cash, generates north of £2b in FCF a year & with net debt of £7.2b only runs leverage at 1.9*; curve already trades on wide end (its tight space) of A-/BBB+ peers.
  • Some analyst are noting it has provisioned for this - we see only ~£200m in total provisions & note in annual reports against NEC claims it has; "Any potential costs relating to these actions are not considered probable and cannot be reliably estimated at the current time".
  • It has a reported "hundreds of lawsuits" against Enfamil causing NEC in premature infants. It will appeal the loss.
  • RKTLN has £ & $ lines as well
Credit BulletsBulletHomepagemarkets-real-timeCredit
Credit BulletsBulletHomepagemarkets-real-timeCredit

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