Moody's cuts Angiotech, rates note Ba3

Moody's Investors Service said it downgraded Angiotech Pharmaceuticals, Inc.'s corporate family rating to B1 from Ba3, speculative grade liquidity rating to SGL-3 from SGl-2, loss-given-default assessment to LGD4 (65%) from LGD4 (50%) and the loss-given-default assessment on the company's B2 $250 million senior subordinated notes due 2014 to LGD6 (91%) from LGD5 (82%).

The agency also assigned a Ba3 rating with a loss-given-default assessment of LGD3 (46%) to the company's $325 million guaranteed senior unsecured notes due 2013 and affirmed the probability-of-default rating at Ba3.

The outlook is negative.

Moody's expects that proceeds from the senior unsecured notes will be used to repay the outstanding principal amount under Angiotech's senior secured term loan facility and that the company will terminate its current revolving credit facility.

The downgrade of Angiotech's corporate family rating to B1 reflects the company's weaker-than-anticipated results; a decline in EBITDA related to lower royalties from the Taxus drug-eluting stent, a high-margin product that accounts for almost 50% of the company's revenues; higher-than-anticipated sales and marketing expenses; a slowdown in orders from original equipment manufacturers; and a more pessimistic view of the drug-eluting stent market, the agency said.

The downgrade in the speculative grade liquidity rating reflects the absence of access to external liquidity, lower cash flow guidance and deteriorating operating trends. Moody's said that while the company's $100 million of cash on hand serves as adequate cushion against unforeseen events, the company's financial flexibility and liquidity would be materially reduced if the cash balance were to decline to below $50 million.

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