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Investing.com -- Moody’s Ratings has downgraded Neogen Food Safety Corporation’s Corporate Family Rating (CFR) to B1 from Ba3 while revising the company’s outlook to stable from negative.
The ratings agency also lowered Neogen’s Probability of Default Rating to B1-PD from Ba3-PD and downgraded its senior unsecured notes rating to B3 from B2. The company maintains an SGL-2 Speculative Grade Liquidity rating, indicating good liquidity.
According to Moody’s, the downgrade reflects expectations that Neogen’s gross debt/EBITDA ratio will remain above 5 times over the next 12 to 18 months. While the company recently divested its cleaners and disinfectants business and is considering selling its genomics business to reduce debt, these moves will result in reduced size, scale, and business diversification.
Moody’s anticipates Neogen will face below-average organic growth in the low single digits due to federal government spending cuts, deregulation, and tariff uncertainties leading to cautious customer spending. The company also continues to struggle with integrating the 3M Food Safety business it acquired in 2022, including production issues and manufacturing transition challenges expected to continue until the second fiscal quarter of 2027.
The stable outlook reflects Moody’s expectation that Neogen’s gross debt/EBITDA ratio will improve toward the mid-5 times range over the next 12-18 months, supported by mid-single digit EBITDA growth.
Neogen’s B1 rating is supported by its leading global market position in food and animal safety products, high proportion of recurring consumable sales with attractive margins, and diversified customer base. However, the rating is constrained by ongoing integration challenges, macroeconomic headwinds, and limited diversification beyond food and animal safety.
As of August 31, 2025, Neogen had approximately $139 million in cash and $48.5 million outstanding on its $250 million revolving credit facility, which expires in 2030. Moody’s expects the company to generate modestly positive free cash flow as capital expenditures moderate.
Factors that could lead to a future ratings upgrade include a return to above-average organic growth rates, reduction in EBITDA add-backs, improved free cash flow, and gross debt/EBITDA sustained below 4.5 times. Conversely, a downgrade could result from escalating integration challenges, significant customer losses, weaker market conditions, aggressive financial policies, or gross debt/EBITDA sustained above 5.5 times.
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