Moody's ups Sanofi-Aventis outlook to positive

Moody's Investors Service said it affirmed Sanofi-Aventis AS's A1 long-term and Prime-1 short-term senior unsecured debt ratings and changed the outlook to positive from stable.

The rating affirmation reflects Moody's view that the company significantly strengthened its positioning within the A1 category during 2005, based on the following factors: the integration of Aventis and the achievement of cost synergies from the merger between Sanofi-Synthelabo and Aventis have been successfully delivered, the company significantly improved its credit metrics in 2005 thanks to both the use of free cash-flow for debt reduction and solid growth generated by the portfolio and the group's liquidity remains very healthy.

Nevertheless, the rating remains constrained by a significant debt burden, estimated at around €16 billion on an adjusted gross basis at year-end 2005. Indeed, despite the significant improvement achieved, Moody's said 2005 credit metrics remain on average only in line with Baa characteristics: operating cash-flow to adjusted debt was around 40%, free cash-flow to adjusted debt is about 25% and cash coverage of debt was below 10%.

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