Moody's may cut Bayer

Moody's Investors Service said it placed the A3 rating for the senior unsecured debt of Bayer AG and its guaranteed subsidiaries on review for possible downgrade, following the announcement of its recommended all-cash offer to acquire 100% of Schering AG's share capital for a total cash consideration of €16.3 billion.

The Baa2 rating assigned to the subordinated notes issued by Bayer AG was also placed on review for possible downgrade, the agency said.

The rating review reflects Moody's expectation that the proposed transaction will result in a weakened capital structure and cash flow to debt ratios for Bayer.

This is mitigated to an extent by the transaction's potential to enhance the overall position of Bayer's pharmaceutical franchise, particularly considering the common focus that both companies have on specialized therapeutic areas and biological products as well as to create the cost synergies that management expects to be able to extract from the combination of the two operations, the agency added.

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