Moody's ups AmerisourceBergen

Moody's Investors Service said it upgraded the speculative grade liquidity rating of AmerisourceBergen Corp. to SGL-2 from SGL-3. The company's long-term ratings are unaffected by this rating action.

The SGL-2 rating reflects Moody's updated assessment of AmerisourceBergen's near-term liquidity position, recognizing the company's reduced reliance on external sources of liquidity, good operating cash flow generation, and a solid near-term covenant compliance cushion.

Although these factors are offset to some extent by lower free cash flow due to temporarily higher capital spending and the recent loss of a key contract, the company is expected to have a good level of liquidity over the next 12 months, the agency said.

Operating cash flow continues to benefit from synergies and efficiencies realized following the 2001 merger of Amerisource and Bergen Brunswig. The company still expects to reap initial cost savings of about $150 million by the end of fiscal 2004 and will continue to achieve additional cost saving benefits going forward. In addition, as consolidation continues and new distribution centers come on-line, greater working capital efficiencies should help reduce cash needs.

Moderating these positive trends is the fact that, in December, AmerisourceBergen lost its bid to renew its contract with the Department of Veterans Affairs. The contract represented approximately 8% of 2004 revenue, and while profitability will be hindered until the company can eliminate or redeploy costs associated with the VA, working capital benefits will help offset lower net income, minimizing the impact on cash flow.

AmerisourceBergen's senior implied rating is Ba2 with a positive outlook.

© 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.