INC Research upgraded by S&P after IPO

Raleigh pharmaceutical services company INC Research was rewarded for last week's successful IPO with a credit rating upgrade from Standard & Poor's. But the Wall Street rating company said it's unlikely to upgrade INC again as long as most of INC's stock remains concentrated in the hands of just two investors.

S&P upgraded INC from a single B+ to a double BB- and removed the company from its CreditWatch list on Monday. The upgrade is the result of INC trimming its debt from $588 million to $425 million and lowering its interest rate on the debt.

Despite INC's public stock offering late last week, 81.3 percent of INC's shares are held by two investors that acquired INC in 2010 and leveraged the company with high-interest debt. The investors are Avista Capital Partners, a private equity firm, and Ontario Teachers Pension Plan, a Canadian public pension fund.

S&P frowns upon such "sponsor involvement" in a publicly traded company because historically such owners, who have majority votes on company boards, have been more aggressive about amassing debt. They also have not been averse to taking on financial liability to as a means of producing dividends for themselves, said S&P spokeswoman Shannan Murphy.

INC's owners have not exhibited those risk-prone tendencies and have managed the company conservatively, Murphy noted.

"While we view this equity offering as a first step towards public ownership, we continue to view ongoing sponsor involvement as a risk factor," S&P wrote Monday. "For this reason, we would be unlikely to upgrade until other shareholders own at least 50% of the company."

INC is a contract research organization that tests experimental drugs for safety and effectiveness. INC employs about 5,500 globally, including 800 in Raleigh.

INC priced its stock at $18.50 last week, netting the company about $135 million. The stock closed at $20.96 Tuesday, up 29 cents.

Before the IPO, about 97 percent of INC had been owned by Avista and Ontario Teachers, but that percentage has been diluted by the offering of more than 8 million public shares.