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S&P puts Teva on positive watch
Standard & Poor's placed all the ratings on Teva Pharmaceutical Industries Ltd. on positive watch. reflecting continued strong operating performance and the possibility that a significant portion of its debt may be retired with stock in the near future.
Teva Pharmaceutical Finance LLC, an affiliate of Teva, has called for redemption on Oct. 15 its $550 million in outstanding 1.5% convertible senior debentures due 2005. Teva will redeem each $1,000 in principal amount for $1,003.75 plus unpaid interest of $7.50.
At the current share price of Teva, debtholders will instead receive significantly greater consideration if they elect to convert their debt to stock.
Meanwhile, Teva's cash flow is expected to remain strong.
The company generated more than $200 million in free cash flow for the six months ended June 30, compared with $164 million in the previous year, due largely to the continued solid prospects for the generic drug industry and the strong performance of its multiple sclerosis treatment Copaxone, S&P noted.
Teva is acquisitive, but the potential conversion of significant debt into equity could provide the financial capacity for the company to grow while maintaining credit measures appropriate for a higher rating.
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