S&P keeps Boston Scientific on negative watch

Standard & Poor's said Boston Scientific Corp.'s A long-term and A-1 short-term corporate credit ratings remain on CreditWatch with negative implications, where they were placed on Dec. 5, reflecting the company's plan to purchase Guidant Corp. (A-/negative watch/A-2).

Boston Scientific, which prevailed in its bidding war against Johnson & Johnson (AAA/stable/A-1+), will pay $27.5 billion to purchase Guidant. S&P said it will likely revise Boston Scientific's corporate credit rating to BBB+/stable/A-2 upon consummation of the merger.

The agency said that post merger, Boston Scientific's ratings will reflect its broadened portfolio of market-leading medical devices and strong cash flow.

These strengths will be offset by sharply increased leverage resulting from the acquisition and operational difficulties: Guidant will be challenged to regain lost market share resulting from a spate of recalls of its implantable cardioverter defibrillators in the third quarter of 2005, and Guidant is currently operating under FDA warning letter, S&P said.

The acquisition will increase debt to $10 billion from $2 billion, and debt to EBITDA will initially rise to 3.5x. S&P said that Boston Scientific has demonstrated the commitment and ability to repay debt in the past, however, and financial metrics will likely be restored to investment-grade parameters within a year.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.