S&P assigns Bayer notes BBB

Standard & Poor's said it assigned its BBB long-term issue rating to the proposed long-dated optionally deferrable and subordinated hybrid notes to be issued by Bayer AG (A-/stable/A-2).

Bayer is considering issuing benchmark size issues of hybrid notes in two tranches, NC6 and NC10, with maturities in 2075 and 2074, respectively, to finance the acquisition of Merck & Co. Inc.'s consumer care business.

The notes are proposed to have a six-year non-call period from the issuance for tranche NC6 and 10 years for tranche NC10, callable annually thereafter, and would be optionally deferrable and subordinated. They also contain an "acquisition event" for early redemption, which would occur if Bayer fails to close the acquisition of Merck's consumer care business prior to March 31, 2015.

S&P said the BBB issue rating on the notes reflects a downward adjustment from the issuer credit rating of one notch for subordination because the corporate credit rating on Bayer is investment grade and one notch for the optional deferability of interest.

In the agency’s opinion, there is a relatively low likelihood that the issuer will defer interest; should its view change, S&P may increase the number of downward notches that it applies to the issue rating.

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