Moody's cuts Watson Pharmaceutical convertibles to Ba2, rates loans Ba1

Moody's Investors Service said it assigned a Ba1 rating to Watson Pharmaceutical, Inc.'s proposed new bank credit facility - which includes a $500 million senior unsecured revolving credit facility due 2011 and $650 million senior unsecured term loan due 2011 - and downgraded the company's $575 million convertible senior debt due 2023 to Ba2 from Ba1.

The agency also affirmed Watson's Ba1 corporate family rating and Ba1 $300 million senior unsecured revolving credit facility due 2008 and confirmed the speculative grade liquidity rating at SGL-1.

The outlook is stable.

Moody's said the ratings considers the company's top-five position in the U.S. generic drug market, diversity provided by several branded products, its solid free cash flow and demographic and regulatory trends that support utilization of generic drugs.

Offsetting Watson's credit strengths, the pending acquisition of Andrx Corp. will increase Watson's gross debt levels and significantly deplete its cash balance.

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