Moody's cuts Walgreen

Moody's Investors Service said it downgraded Walgreen Co.'s senior unsecured rating to Baa1 from A3.

At the same time, the agency affirmed Walgreen's commercial paper rating at Prime-2. The outlook is negative.

The agency said the downgrade follows Walgreen's closing on its purchase of 45% of the equity of Alliance Boots, which will weaken its credit metrics. Walgreen's funded debt level will more than double to about $6 billion from $2.4 billion currently in order to finance this transaction.

According to Moody's, this will result in Walgreen's debt to EBITDA increasing to around 4 times at Aug. 31 from 3.3 times for the lagging twelve months ended May 31. In addition, Moody's said the downgrade acknowledges the substantial amount of debt at Alliance Boots and Alliance Boots' substantial debt maturities in 2014 and 2015.

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