Moody's rates Merck bonds Baa1

Moody's Investors Service said it affirmed the senior unsecured issuer ratings of Merck KGaA at Baa1 and Prime-2.

The outlook has been changed to positive from stable.

Moody's said it will assign a Baa1 to the announced €500 million bond issue of Merck Finanz AG, guaranteed by Merck KGaA.

Moody's said that the rating affirmation reflects the company's reasonably diversified business profile and the strong positions in the fast growing liquid crystal market that should generate increasing cash flows over time.

However, the agency said the ratings are constrained by Merck's modest size in the pharmaceutical markets and the modest free cash-flow due to moderate margins outside liquid crystals and sustained capital expenditures.

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