Moody's raises Mayne's view to stable

Moody's said it affirmed Mayne Group Ltd.'s senior unsecured rating of Ba1, but revised the rating outlook to stable from negative.

The outlook change follows the company's announcement that it will proceed with the demerger of its international pharmaceutical business, Moody's said.

Moody's said the outlook will be stable irrespective of whether shareholders accepted the demerger proposal or not.

Mayne Group's current rating reflects the following strengths: a significant portion of revenues are provided from government-based Medicare funding; stable revenue streams from health services; high barriers to entry, including capital costs and accreditation requirements; and diversified operations.

Moody's said the rating also reflects credit challenges that include evolving corporate strategy, high leverage and threat of deregulation in the pharmacy sector.

Moody's noted that should the demerger proceed, the $291 million of bonds due in February 2006 would be refinanced through committed bank facilities. As a result, the new business, Symbion Health Ltd., would be expected to be financed by bank debt after February 2006.

Assuming the demerger proceeds, the rating may come under upward pressure should new management establish a track record of running the company in a stable and effective manner.

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