Moody's cuts King Pharmaceuticals view to negative

Moody's Investors Service said it revised the outlook on King Pharmaceuticals, Inc. to stable from negative and affirmed the company's Ba3 corporate family rating and Baa3 $400 million secured credit agreement due April 2007. The agency does not rate King's $400 million senior unsecured convertible notes due 2026.

The agency said the change in outlook acknowledges several key improvements in the past two years, including strong cash flows in 2006 driven by sales of Altace, Skelaxin, and Thrombin; reduced uncertainty regarding the threat of a near-term generic Altace launch; resolution of certain legal matters including an Office of Inspector General investigation; and correction of earlier deficiencies in internal controls over financial reporting.

Moody's said the Ba3 corporate family rating balances King's very favorable cash flow relative to debt and cash coverage of debt against its unfavorable exposure to patent expirations and challenges, its size and scale and its acquisition strategy, which could result in incremental debt levels.

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