Moody's rates Medtronic convertibles A1

Moody's Investors Service said it assigned an A1 rating to Medtronic Inc.'s new $4 billion senior convertible notes due 2011 and 2013. The outlook is stable.

The agency said it anticipates that proceeds will be used to refinance $2 billion in existing convertible notes, which can be put or called in September, as well as to fund an accelerated stock purchase program of $2.5 billion.

Medtronic has significant financial flexibility primarily because of its strong cash flow and cash balances. Moody's said it believes that the accelerated share buyback initiative, which will result in a total of $3.5 billion in share buybacks during fiscal 2006, represents a more aggressive financial policy than historically, but expects the transaction to be one-time in nature.

Moody's described Medtronic as among the largest and most diverse medical device companies it rates, but noted that the company's concentration risk remains relatively high with almost 50% of revenue coming from its cardiac rhythm management division, where sales of implantable cardiac defibrillators are a major contributor to sales growth.

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