S&P may cut Boston Scientific, up Guidant

Standard & Poor's said it placed its ratings for Boston Scientific Corp. on CreditWatch with negative implications, including the A corporate credit rating, A unsecured bank loan rating, A senior unsecured debt rating and A-1 commercial paper rating.

In a related action, S&P placed Guidant Corp.'s ratings on CreditWatch with positive implications, including its A- corporate credit rating, A- unsecured bank loan rating, A- senior unsecured debt rating and A-2 commercial paper rating.

The CreditWatch placements reflect Boston Scientifics's announced intention to purchase Guidant Corp. for $25 billion. Although the addition of Guidant's sizable implantable cardioverter defibrillator business will materially diversify Boston Scientific's product portfolio and provide a key product line with significant growth potential, the transition will substantially increase debt leverage, the agency said.

This offer comes on the heels of a renegotiated merger deal between Guidant and Johnson & Johnson (AAA/stable/A-1+). The original $25.4 billion purchase price, agreed to in late 2004, was subsequently revised to $21.5; Johnson & Johnson maintained that recent Guidant product recalls and related litigation challenges constituted a material adverse development.

While the combination of Boston Scientific and Guidant should provide significant operating cash flow (roughly $3 billion annually), the long-term repercussions of Guidant's recent difficulties remain unclear, the agency said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.