S&P: Zimmer on watch due to proposed acquisition

Standard & Poor's said it placed the ratings on Zimmer Holdings Inc. on CreditWatch with negative implications.

This action reflects Zimmer's intention to acquire Biomet Inc. in a largely debt-financed transaction.

The company is expected to finance the $13.35 billion transaction with $3 billion of equity and $10.35 billion of cash, S&P said.

A new $3 billion senior unsecured term loan and newly issued senior unsecured notes will be used to repay a 364-day bridge facility, reduce a portion of outstanding debt and fund transaction costs, the agency said.

S&P said it expects to lower Zimmer's corporate credit rating and senior unsecured debt ratings to BBB when the merger is completed, which is expected to be in late 2014 or early 2015.

Pro forma for the transaction, S&P said it estimates debt leverage will be between 3.5x and 4x.

The company's business risk profile incorporates the enhanced scale, market share and critical mass in the faster growing extremities/trauma markets resulting from the merger, the agency said.

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