Moody's may downgrade Omnicare

Moody's Investors Service placed the ratings of Omnicare, Inc. under review for possible downgrade following the joint announcement by Omnicare and NeighborCare, which stated that the companies are in negotiations regarding the proposed acquisition by Omnicare of NeighborCare for $34.75 per share.

In addition, Omnicare has announced the acquisition of RxCrossroads, a specialty pharmaceutical distributor for $235 million.

Affected ratings include the Ba1 $750 million senior unsecured bank credit facilities, issuer rating and corporate family rating in addition to the Ba2 $625 million senior subordinated notes.

The rating review for possible downgrade of Omnicare's debt is prompted by an increased likelihood that Omnicare will reach a definitive agreement to acquire NeighborCare, higher financial risk and likelihood of leverage in light of Omnicare's higher offer and the RxCrossroads transaction and uncertainty associated with the transition to a new reimbursement system for a large portion of both Omnicare's and NeighborCare's patients, the agency noted.

However, Moody's said it will consider Omnicare's plans for financing both transactions, cash flow expectations for the combined company including any potential cost-savings and plans for deleveraging as well as the benefits of entering the specialty distribution space, which remains outside of management's current expertise.

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