Moody's lifts Watson from junk

Moody's Investors Service said it raised Watson Pharmaceuticals, Inc.'s $450 million senior unsecured notes due 2014 to Baa3 from Ba1, $400 million senior unsecured notes due 2019 to Baa3 from Ba1 and senior unsecured shelf rating to provisional Baa3 from provisional Ba1. Its senior unsecured revolving credit facility due 2011 was affirmed at Baa3 and senior unsecured first-lien term loan due 2011 at Baa3.

The outlook is stable.

The upgrade to investment grade reflects Watson's solid operating performance and cash flow generation, improved geographic diversity following the recent acquisition of Arrow Pharmaceuticals Group and the expectation that the positive performance trend will continue, Moody's said.

Watson enjoys good growth prospects based on its expanding generic drug pipeline and recent expansion into international markets, where generic utilization rates are poised to increase, the agency said.

The ratings also incorporate Watson's history of post-acquisition debt reduction and clearly articulated financial targets including a debt-to-EBITDA ratio below 3.25x, the agency added.

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