• On 21 May 2013, Moody’s announced rating actions on MBIA Insurance Corp., National Public Finance Guarantee Corp., MBIA Inc. and other related entities. Because of the large number of credits across several asset classes affected by these rating actions, including Moody's-rated securities that are guaranteed or "wrapped" by these companies, ratings appearing on this website may not yet reflect current information. For current information on affected credits, please visit www.moodys.com/fig.
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Related Issuers
Announcement:

Moody's places Walgreen's A3 sr unsecured rating on review for downgrade

Global Credit Research - 19 Jun 2012

Approximately $2.3 Billion of Debt Securities Affected

New York, June 19, 2012 -- Moody's Investors Service today placed Walgreen Co.'s senior unsecured rating on review for downgrade. At the same time, Moody's affirmed Walgreen's commercial paper rating of Prime--2. The review for downgrade is prompted by Walgreen's announcement that it had entered into an agreement to purchase 45% of the equity of Alliance Boots. Walgreen intends to finance this transaction with a combination of additional debt, equity, and excess cash.

The following ratings are placed on review for downgrade

Senior unsecured rating of A3

Senior unsecured shelf rating of (P) A3

The following rating is affirmed

Commercial paper rating of Prime-2

RATINGS RATIONALE

The review for downgrade is prompted by the sizable amount of debt that Walgreen will incur to finance the equity purchase. Moody's estimates the additional debt will add about a half a turn to Walgreen's existing debt to EBITDA. In addition, the review also reflects the sizable amount of debt at Alliance Boots as well as its large near dated debt maturities starting in 2014. "Walgreen's equity investment in Alliance Boots will weaken its capital structure. Alliance Boots is a highly leveraged company and Walgreen will also significantly increase its debt level to finance the investment," stated Maggie Taylor, a senior credit officer with Moody's. "However, the combination should drive substantial cost savings from purchasing synergies for both companies," she added.

The review will focus on the potential synergies and cost savings that both companies may achieve. The review will also focus on Walgreen's proforma capital structure and liquidity as well as the economic impact on Walgreen due to Alliance Boots highly leverage capital structured and near dated debt maturities. The review will also consider the economic environment in Europe where Alliance Boots has a sizable amount of business. The review will also consider the satisfaction of certain conditions including notification and clearance by antitrust authorties in the U.S. and Germany. Finally, the review will assess Walgreen's go forward financial policy.

Based upon the terms of the transaction as outlined, should Walgreen's long term ratings be downgraded, Moody's anticipates that its senior unsecured rating would likely only be downgraded by one notch. In addtion, Moody's also expects that the commercial paper rating of Prime-2 would be affirmed. Moody's anticipates that Walgreen's rating outlook may remain negative given Alliance Boots highly leveraged capital structure and its sizable near term debt maturities. The reveiw for downgrade will conclude after the successful closing of the transaction.

The principal methodology used in rating Walgreen Co. was the Global Retail Industry Methodology published in June 2011. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Walgreen Company, headquartered in Deerfield, Illinois, operates over 7,800 drugstores in all 50 states, the District of Columbia, and Puerto Rico. It also operates 700 worksite health centers and retail clinics along with home care facilities. Revenues are about $72 billion. Alliance Boots, incorporated in Switzerland, is a pharmacy-led healthy and beauty retailer and a pharmaceutical wholesaler and distritbutor in the United Kingdom and throughout Europe. Alliance Boots revenues are about GBP23 million.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Margaret Taylor
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Kendra M. Smith
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's places Walgreen's A3 sr unsecured rating on review for downgrade
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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