Moody’s drops Abbott, rates St. Jude loans Baa3

Moody's Investors Service said it downgraded Abbott Laboratories' senior unsecured debt ratings to Baa3 from A2 following the close of its acquisition of St. Jude Medical Inc. on Jan. 4.

The agency also downgraded the short-term rating to Prime-3 from Prime-1.

The Baa3 ratings on Abbott's new unsecured notes that were issued on Nov. 17 to partially finance the St. Jude deal remain unchanged.

At the same time, Moody's assigned Baa3 ratings to St. Jude Medical, LLC's term loans, which reflect amendments and restatements to St. Jude's existing term loans and are guaranteed by Abbott.

The outlook is stable. This concludes the review that was initiated on Feb. 1, 2016.

Abbott's Baa3 ratings reflect its significant scale and product line diversification, Moody’s said. The rating is constrained by Abbott's high financial leverage following the St. Jude Medical and Alere acquisitions and the agency’s belief that Abbott will face challenges in deleveraging.

Moody's said it expects that following the close of both deals, Abbott's debt/EBITDA will estimate 4.5 times on a pro-forma basis even after planned divestitures. Abbott is targeting debt/EBITDA of 3.5 times two years post-close.

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