Moody's cuts St. Jude view to stable

Moody's Investors Service said it changed the outlook for St. Jude Medical to stable from positive following news that it was acquiring AGA Medical Corp. for $1.3 billion, and that its board had authorized a new share buyback program totaling $600 million.

The agency also said it affirmed St. Jude's Baa1 long-term debt ratings and prime-2 short-term rating.

Moody's also said it placed AGA Medical's B3 corporate family and probability of default ratings and B2 senior secured bank facility under review for possible upgrade.

The change in outlook reflects a belief that because of additional leverage associated with what appears to be a richly priced transaction and a subsequent share buyback, St. Jude will not be able to sustain credit metrics that will position it for an upgrade over the next 12 to 18 months, the agency said.

St. Jude's appetite for leverage is somewhat more aggressive than expected when the positive outlook was assigned last year, Moody's said.

The ratings also consider the company's high concentration in cardiac rhythm management products, which have been challenged by low single-digit market growth rates, the agency said.

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