S&P cuts Teva outlook

Standard & Poor's lowered the outlook on Teva Pharmaceutical Industries Ltd. to negative from stable, in response to its plans to acquire Sicor Inc. in a $3.4 billion transaction to be financed with debt and stock. The BBB corporate credit and senior unsecured debt ratings were confirmed.

Teva's operating performance and credit protection measures have historically been strong for its rating, with EBITDA operating margins of roughly 25% and EBITDA interest coverage typically exceeding 10x, S&P said. However, with the use of some $2 billion of cash and debt to fund the Sicor acquisition, credit protection measures will be stretched.

Currently, Teva has roughly $1.4 billion of cash and short-term investments on hand. Cash flow has been strong, with funds from operations for the 12 months ended June 30 totaling $571 million. Teva does not face any significant near-term debt maturities.

The company converted $550 million of convertible senior notes, but still has $360 million of convertible senior notes due 2021 that are putable in August 2004.

Moody's rates PMI mandatory A1

Moody's Investors Service assigned a rating of A1 to the proposed $345 million hybrid income term security units of The PMI Group Inc., the holding company of PMI Mortgage Insurance Co., which has a Aa2 insurance financial strength rating. The outlook is stable.

S&P says Duke's weak earning pressures ratings

Standard & Poor's said that Duke Energy Corp.'s (BBB+/negative/A-2) weak third-quarter earnings places additional pressure on its credit profile and may adversely affect the ratings in the intermediate term.

While S&P recognizes that the weaker earnings were in part driven by non-cash charges related to write-offs of goodwill, it also recognizes that continued weakness at Duke Energy North America undermines the consolidated financial profile upon which the current ratings are based.

S&P has an ongoing review of the company under way.

Moody's puts Wolters Kluwer on review

Moody's Investors Service put the ratings of Wolters Kluwer NV's long-term debt (senior at A3) under review for possible downgrade, following its announced three-year restructuring plan, on concerns that against the present challenging operating environment, it will delay improvement of debt protection measurements.

At this stage, Moody's said any possible downgrade would be limited to one notch.

The strategy calls for investments of €800 million, structural cost reductions of €240 million and a reorganization of its operations.

Wolters also announced plans to make a tender offer for a number of bonds - €550 million 6.125% due 2005, €750 million 5.5% due 2006 and €700 million 1% convertible due 2006 - which should help reduce its gross debt position and, by extending the maturity profile, addresses substantial refinancing needs for 2005 and 2006, Moody's said.

The tenders are expected to be funded with cash on hand, which stood at €723 million on June 30, and a new bond offer, and if necessary by drawings under the company's bank facility.

In addition to the planned reorganization, including an 8% workforce reduction, Wolters plans to increase investment in new product development by €200 million to €800 million over the next three to four years. Cost reductions target annualized savings of €100 million from 2007 onwards.

Moody's cuts Vishay convertibles to B3

Moody's Investors Service downgraded the ratings of Vishay Intertechnology Inc., including its 0% and 3.625% convertibles to B3 from B2, citing continuing weakness in the company's business and the possibility of further special charges. The outlook is negative.

The outlook reflects concern that the lack of organic growth, slim margins, minimal earnings and poor quality cash flow, coupled with ongoing restructuring charges and possible additional special charges, a higher risk profile as well as the likelihood of a covenant violation.

Despite a generally stable or improving technology market, Vishay has unexpectedly continued to experience declining sales and margins, with gross profit in the September quarter down from 22.7% to 19.2% from a year ago.

The company also incurred additional restructuring expenses in third quarter, which are likely to continue, and cash flow is strained by long-term tantalum purchases that, at current operating levels, far exceed its needs.

Additional special charges, whether in connection with tantalum, restructuring or other things, coupled with a continuing weak financial performance, may erode Vishay's net worth position, making it difficult to meet the minimum tangible net worth covenant of $850 million in its revolver - its principal source of secondary liquidity, Moody's 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.