Moody's rates Merck loan, notes Aa3

Moody's Investors Service said it assigned Aa3 ratings to Merck & Co., Inc.'s $250 million senior unsecured notes due 2011, $500 million senior unsecured notes due 2036 and $1.5 billion bank credit agreement due 2011.

The Aa3 senior unsecured issuer rating, notes, eurobonds, debentures and industrial revenue bonds; provisional Aa3 senior unsecured shelf rating; and Prime-1 short-term debt rating for commercial paper were affirmed.

The outlook remains negative.

The agency said Merck's Aa3 rating continues to reflect its Aaa levels of cash flow from operations to debt, free cash flow to debt, profitability and return and cash coverage of debt and excellent liquidity, including over $15 billion of cash and investment securities at Sept. 30.

These factors are offset by higher-than-average product concentration risk, exposure to patent expirations and potential litigation contingencies, Moody's said.

"On balance, trial court cases related to Vioxx have been decided more favorably for Merck than Moody's originally anticipated," Michael Levesque, Moody's vice president and senior credit officer, said in an agency rating. The agency noted, however, that Vioxx costs exceeding $10 billion or resolution of tax liabilities close to the $5.57 billion amount could result in a rating downgrade.

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