Moody's might lower Cardinal

Moody's Investors Service said it placed Cardinal Health, Inc.'s Baa2 senior and Prime-2 short-term ratings and Allegiance Corp.'s Baa2 senior bonds on review for downgrade following Walgreen Co.'s announcement that it would not be renewing its contract with Cardinal. Walgreen is Cardinal's second-largest customer representing about 21% of total sales.

The agency believes that based solely on the loss of this contract, any rating downgrade would be limited to one notch. At this time, however, it is unclear whether other negative developments could further affect the ratings, Moody's said.

Moody's review will focus on the effects of the contract loss on Cardinal's future profitability as well as cash flows, Cardinal's acquisition and shareholder strategy following this contract loss, the industry-wide implications of Walgreen's new strategic alliance with AmerisourceBergen and the outcome of the CVS/Caremark contract renewal process.

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