Moody's Investors Service placed the ratings of Endo Luxembourg Finance I Company S.à.r.l. (Nasdaq: ENDP) and subsidiaries under review for downgrade, including the Ba3 Corporate Family Rating, the Ba3-PD Probability of Default Rating, the Baa3 senior secured rating and the B1 senior unsecured rating. At the same time, Moody's affirmed the SGL-2 Speculative Grade Liquidity Rating, reflecting good liquidity prior to the acquisition of Par. Moody's will evaluate Endo's liquidity based on its post-acquisition financing structure and the SGL may change as part of our analysis.

The review is prompted by Endo's announcement that it will acquire Par Pharmaceutical Holdings, Inc. ("Par") for $8.05 billion in cash and equity. The acquisition will meaningfully increase financial leverage to a level that is well above Endo's target debt-to-EBITDA range of 3.0x -- 4.0x. Moody's estimates pro forma adjusted debt to EBITDA will be in the mid-5.0x range at year-end 2015.

While there will be deleveraging opportunities (for example, Endo is expected to receive net proceeds of approximately $1.5 billion from the pending sale its AMS men's urology business), the rating review reflects the possibility of a downgrade if Moody's believes that financial leverage will remain elevated for a protracted period of time. The review also reflects limited cushion within Endo's current rating because of a recent increase in financial leverage to acquire Auxilium Pharmaceuticals, high litigation costs over the next two years and Endo's aggressive acquisition appetite, having made an unsolicited bid for Salix Pharmaceuticals in March 2015. Although that deal was not consummated, it would have significantly increased Endo's credit risk.

Moody's review will focus on Endo's capital structure and financial leverage, its deleveraging plans, its overall acquisition strategy, and the benefits of scale, diversification and organic growth that the acquisition of Par will bring.

Moody's anticipates that the rating downgrade, if any, would be limited to one notch.

Ratings placed on review for Downgrade:

Issuer: Endo Luxembourg Finance I Company S.à.r.l.

Probability of Default Rating, at Ba3-PD

Corporate Family Rating, at Ba3

Senior Secured Bank Credit Facility, at Baa3

Issuer: Endo Finance Co.

Senior Unsecured, at B1 (LGD 4)

Issuer: Endo Finance LLC

Senior Unsecured, at B1 (LGD 4)

Rating Affirmed:

Issuer: Endo Luxembourg Finance I Company S.à.r.l.

Speculative Grade Liquidity Rating, at SGL-2

Outlook Actions:

Issuer: Endo Finance Co.

Outlook, Changed To Rating Under Review From Stable

Issuer: Endo Finance LLC

Outlook, Changed To Rating Under Review From Stable

Issuer: Endo Luxembourg Finance I Company S.a.r.l.

Outlook, Changed To Rating Under Review From Stable

RATINGS RATIONALE

Endo's Ba3 Corporate Family Rating (under review for downgrade) reflects its modest size and scale relative to larger pharmaceutical peers, partially offset by the company's solid market positioning as a niche player in the pain and urology markets and by its revenue diversity across branded drugs, generic drugs and medical devices. Endo's expertise in pain drugs and its good compliance with US Drug Enforcement Agency (DEA) regulations act as high barriers to entry, also a credit strength. The company's organic growth rates are constrained by pressures facing core pharmaceutical products like Lidoderm and Opana ER although this will be somewhat improved by the good organic growth outlook for Par. Further, Endo faces large cash outflows related to product safety lawsuits involving its surgical mesh products. Amidst these pressures, Endo is pursuing cost reduction initiatives and an acquisition strategy focused on specialty pharmaceutical companies, most recently closing the acquisition of Auxilium Pharmaceuticals, Inc. in January 2015. Endo's publicly articulated financial policies include sustaining debt/EBITDA within a range of 3.0 to 4.0 times.

The principal methodology used in these ratings was Global Pharmaceutical Industry published in December 2012. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.