S&P: St. Jude Medical on negative watch

Standard & Poor’s said it placed St. Jude Medical Inc.’s A corporate credit rating on CreditWatch with negative implications.

The CreditWatch placement primarily reflects an expectation for a moderate increase in St. Jude’s debt burden to support its acquisition of Thoratec, S&P said.

The potential additional debt borrowing could result in leverage pro forma for the transaction of more than 3x, which is a meaningful increase from historical levels of 1.8x, the agency said.

S&P said it expects to resolve the CreditWatch once the company is closer to finalizing the acquisition and the debt financing has been determined.

The agency said it expects a downgrade of one or two notches, depending on the assessment of credit metrics and the company’s commitment to reducing the higher debt burden.

Fitch puts St. Jude on watch

Fitch Ratings said it placed St. Jude Medical, Inc.’s ratings on negative watch following its announced intention to acquire Thoratec Corp. for about $3.4 billion.

This is an all-cash transaction, Fitch said, adding that it believes any downgrade would be limited to one-notch, if the acquisition is completed under the current proposed terms.

The agency said it believes the company’s intended acquisition is strategically constructive and provides an adjacent product platform to its cardiovascular business, as well as an expansion of its treatment offerings for heart-failure patients.

Fitch said the acquisition will likely increase St. Jude’s total debt-to-EBITDA in the intermediate term, which is already stressed for the company’s A rating.

The stabilizing domestic cardiac rhythm management market, new product introductions and emerging market opportunities should support some organic revenue growth for the company during 2015 and beyond, the agency said.

S&P rates Intel notes A+

Standard & Poor’s said it assigned an A+ rating to Intel Corp.’s announced senior unsecured notes offering.

The proceeds will be used to fund a portion of the company’s pending $16.7 billion acquisition of Altera Corp.

Intel indicated that it would fund the acquisition with $7 billion to $9 billion in long-term debt, S&P said.

The company's leverage is expected to remain at less than 0.5x in 2015 and 2016, the agency said.

Fitch rates Intel notes A+

Fitch Ratings said it assigned an A+ rating on Intel Corp.’s $5 billion senior notes offering.

Intel will sell a mix of five-, seven- and 10-year notes in part to fund the $16.7 billion acquisition of Altera Corp., which is expected to close by the end of 2015, Fitch said.

The agency said Intel has long-term and short-term issuer default ratings of A+ and F1, respectively.

The outlook is stable.

The ratings reflect a belief that Intel’s operating profile will remain strong and credit protection measures will remain solid, despite the incremental debt issuance to fund the Altera acquisition, Fitch said.

Longer term, Altera should strengthen Intel’s offerings in certain markets, the agency said.

Altera is a leading provider of field programmable logic devices (PLD) with 39% share in the $5 billion PLD market. By combining Intel’s processors and Altera’s PLDs on a lower cost and better performing single die, Intel hopes to accelerate growth in the data center and take market share from application-specific solutions providers in rapidly growing markets, Fitch said.

Moody’s assigns A1 to Intel debt

Moody's Investors Service said it assigned an A1 rating to Intel Corp.’s proposed senior unsecured debt offering, the proceeds of which will be used to finance the pending acquisition of Altera Corp. for $16.7 billion in cash.

The outlook remains stable.

Both boards of directors have approved the transaction, and subject to Altera's shareholder vote and customary regulatory and closing conditions, Intel expects the acquisition to close over the next six to nine months.

Intel plans to fund the acquisition using a combination of new debt and existing balance sheet cash. Though the acquisition cost is high (about 26 times LTM EBITDA), Intel was modestly levered before the transaction and should remain within the agency’s expectations for its A1 rating.

Even with a significant portion of debt funding, Moody's expects pro forma adjusted gross debt to EBITDA to be well under 1.5 times at closing (using Moody's standard adjustments). Prior to the proposed debt offering, Intel's adjusted gross debt to EBITDA measured 0.7 times.

S&P rates Kansas City Southern notes BBB-

Standard & Poor’s said it assigned a BBB- rating to Kansas City Southern Railway Co.’s senior unsecured notes.

The notes are guaranteed by the company’s parent, Kansas City Southern.

The proceeds will be used to repay the company’s outstanding commercial paper, for share repurchases by Kansas City Southern and for general corporate purposes, S&P said.

The ratings reflect the favorable fundamentals of the North American freight railroad industry, given the limited competition from alternate modes of commercial-freight transport for certain commodities, formidable barriers to entry and moderate cyclicality, the agency said.

The ratings also consider the company’s solid competitive position and good operating efficiency, S&P said.

Despite headwinds from declining fuel-surcharge revenue, the weak Mexican peso and the volatile climate for energy-related products, the company’s revenues and earnings are expected continue benefitting from the positive pricing environment and management’s ongoing focus on efficiency improvements, the agency said.

Fitch rates Kansas City Southern notes BBB-

Fitch Ratings said it assigned a rating of BBB- to the $500 million notes to be issued by Kansas City Southern’s subsidiaries primary U.S. operating entity, Kansas City Southern Railway Co.

The ratings on Kansas City Southern and its two primary subsidiaries, Kansas City Southern Railway and Kansas City Southern de Mexico are unaffected.

The issuance will represent a senior unsecured obligation of Kansas City Southern Railway and will be guaranteed by Kansas City Southern, Fitch said.

The proceeds will be used to repay outstanding commercial paper and for general corporate purposes, including repurchasing shares, the agency said.

Fitch said it expects the incremental debt from the transaction to lead to increased total adjusted debt-to-EBITDAR of about 2.6x to 2.7x by year-end, declining modestly thereafter.

The ratings are supported by the company’s solid operating margins, steadily increasing revenues and moderate leverage, the agency said.

The ratings also consider a view that Kansas City Southern’s credit profile will improve in the coming years, propelled by growth opportunities in Mexico and further operating margin expansion, Fitch said.

© 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.