S&P rates Medtronics' convertibles AA-

Standard & Poor's said it assigned an AA- rating to Medtronics Inc.'s $4 billion convertible senior notes and affirmed the company's AA- long-term corporate credit rating and A-1+ short-term rating. The outlook is stable.

The notes will be used to refinance the $2 billion of outstanding convertible notes that are expected to be exercised at the next put date in September and to partially fund a share repurchase of up to $2.5 billion. This will result in an increase in debt leverage (as of September 2006) to about 1.2x.

S&P predicted that Medtronics' large revenue base, expected EBITDA growth and $4.9 million of cash and short-term investments at Jan. 27 should reduce debt leverage to less than 1x within two years. The rating on Medtronics reflects the company's leading positions in diverse, high-margin medical product markets; strong patent portfolio; very strong cash flow, which supports reinvestment and financial flexibility; and conservative financial policies, the agency said.

These strengths largely insulate the company against the immediate threats of litigation, technological obsolescence and competitors' advances.

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