S&P Upgrades Jazz Pharmaceuticals' Senior Secured Debt to 'BB+' on Improved Recovery Outlook

S&P Global Ratings on Tuesday upgraded its issue-level rating on Jazz Pharmaceuticals PLC’s (NASDAQ:JAZZ) senior secured debt to 'BB+' from 'BB'. The ratings agency also assigned a 'BB+' rating to the company's proposed $1.9 billion term loan, which is intended to extend its debt maturity profile.

The Upgrade Explained

The upgrade was driven by a revision of the recovery rating on the secured debt to '2' from '3'. According to S&P, this change reflects an expected "substantial" recovery of 70%-90% for secured lenders in a potential payment default scenario.

S&P attributed the improved outlook to a higher valuation for Jazz and the agency's view that the company's unsecured debt provides a more significant protective cushion for secured debtholders. The overall 'BB' issuer credit rating and stable outlook for Jazz were maintained.

Strong Financials Underpin Outlook

The stable outlook is supported by S&P's expectation that Jazz will continue to grow revenue and generate strong adjusted free operating cash flow of at least $1.5 billion annually. The company recently reported second-quarter 2026 revenue of $1.2 billion, a 16% increase year-over-year, driven by strength across its product portfolio.

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Jazz's financial position is further bolstered by its low leverage, which stood at 1.8x in 2025. S&P noted this provides a "substantial cushion" against the 3x-4x range the agency views as consistent with the current rating.

Capital Strategy and M&A

The rating action coincides with Jazz's capital management activities. The proposed $1.9 billion term loan is considered leverage-neutral and extends the company's maturity to 2033 from 2028. This follows a recent issuance of $1.25 billion in exchangeable senior notes.

While S&P assumes about $2 billion in annual acquisition spending to support Jazz's growth ambitions, it also views outsized M&A as the greatest downside risk to the rating, referencing the company's $7 billion acquisition of Epidiolex in 2021 as an example.