Moody's: Watson loans on review uncertain

Moody's Investors Service said it affirmed the Ba1 corporate family and probability-of-default ratings of Watson Pharmaceuticals, Inc.

The action follows the announcement that Watson will acquire Arrow Pharmaceuticals Group for $1.75 billion with cash and stock.

The outlook remains positive.

Moody's placed the Baa3 (LGD2, 28%) rating on Watson's senior unsecured credit facility under review with direction uncertain.

The affirmation reflects expectation that Watson will maintain solid credit metrics following the Arrow acquisition, with a pro forma debt-to-EBITDA ratio below 2.5 times, the agency said.

The affirmation also reflects the expected benefits of the acquisition, including enhanced scale and international diversification, pipeline opportunities and potential expansion of Watson's cash flow, the agency noted.

Risks of the Arrow acquisition include integration risks and a high transaction multiple based on Arrow's current EBITDA and cash flow levels, Moody's said.

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