Recipient email addresses will not be used in mailing lists or redistributed.
Use semicolon to separate each address, limit to 20 addresses.
characters you see
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
Don't want to see this again?
Accept our to continue to Moodys.com:
AND SCROLL DOWN!
By clicking “I AGREE” [at the end of this document],
you indicate that you understand and intend these terms and conditions to be
the legal equivalent of a signed, written contract and equally binding, and
that you accept such terms and conditions as a condition of viewing any and all
Moody’s information that becomes accessible to you [after clicking “I AGREE”] (the
“Information”). References herein to “Moody’s” include Moody’s
Corporation, Inc. and each of its subsidiaries and affiliates.
Terms of One-Time Website Use
you have entered into an express written contract with Moody’s to the contrary,
you agree that you have no right to use the Information in a commercial or
public setting and no right to copy it, save it, print it, sell it, or publish
or distribute any portion of it in any form.
acknowledge and agree that Moody’s credit ratings: (i) are current opinions of
the future relative creditworthiness of securities and address no other risk; and
(ii) are not statements of current
or historical fact or recommendations to purchase, hold or sell particular
securities. Moody’s credit ratings and
publications are not intended for retail investors, and it would be reckless
and inappropriate for retail investors to use Moody’s credit ratings and
publications when making an investment decision. No
warranty, express or implied, as the accuracy, timeliness, completeness,
merchantability or fitness for any particular purpose of any Moody’s credit
rating is given or made by Moody’s in any form whatsoever.
3. To the extent permitted by law, Moody’s and its directors,
officers, employees, representatives, licensors and suppliers disclaim
liability for: (i) any indirect, special, consequential, or incidental losses
or damages whatsoever arising from or in connection with use of the
Information; and (ii) any direct or compensatory damages caused to any person
or entity, including but not limited to by any negligence (but excluding fraud
or any other type of liability that by law cannot be excluded) on the part of
Moody’s or any of its directors, officers, employees, agents, representatives,
licensors or suppliers, arising from or in connection with use of the
4. You agree to read [and
be bound by] the more detailed disclosures regarding Moody’s ratings and the
limitations of Moody’s liability included in the Information.
5. You agree that any disputes relating to this agreement or your use of
the Information, whether sounding in contract, tort, statute or otherwise,
shall be governed by the laws of the State of New York and shall be subject to
the exclusive jurisdiction of the courts of the State of New York located in
the City and County of New York, Borough of Manhattan.
13 Apr 2005
MOODY'S CONFIRMS AMERISOURCEBERGEN'S RATINGS (SR. IMPLIED AT Ba2); UPGRADES SENIOR UNSECURED NOTES TO Ba2 AND SPECULATIVE GRADE LIQUIDITY RATING TO SGL-1 FROM SGL-2; OUTLOOK STABLE
New York, April 13, 2005 -- Moody's Investors Service confirmed AmerisourceBergen Corporation's
(ABC's) Ba2 senior implied rating and upgraded the company's
senior unsecured notes to Ba2 from Ba3.
Moody's withdrew the B1 rating on January 3, 2005 Amerisource Health
Corporation's 5% convertible subordinated notes, following
the conversion of substantially all of these notes to equity. Moody's
also upgraded ABC's speculative grade liquidity rating to SGL-1
from SGL-2. The rating outlook is stable. This concludes
Moody's rating review for possible upgrade that was initiated on
December 10, 2004.
The confirmation of ABC's Ba2 senior implied rating is supported
by: (1) ABC's unanticipated and reduced earnings and cash
flow guidance (excluding one time liquidation benefits) for fiscal year
2005; (2) the likelihood that excess cash generated from recent inventory
liquidation will be used for shareholder initiatives; and (3) uncertainty
associated with changes in PharMerica reimbursement.
The senior unsecured notes are being upgraded to Ba2 from Ba3 because
of the elimination of secured bank debt. As a result, all
senior creditors are pari-passu with no preferential standing in
the capital structure.
Since mid-December 2004, ABC has lowered guidance two times,
due to lack of drug price increases and ongoing reductions in buy opportunities.
Despite the fact that ABC had liquidated about $485 million of
excess inventory during fiscal 2004, it appears that stricter enforcement
of lower inventory levels as outlined under inventory management agreements
(IMAs) has resulted in even fewer buy opportunities and lower profitability.
Further liquidation of inventory in 2005 should result in another $600-$700
million in one-time cash flow benefits. However, after
excluding this one-time benefit, based on new guidance provided
in late March 2005, expected operating and free cash flow will decline
by about 30% and 50%, respectively, relative
to the December 2004 guidance that was used by Moody's when it placed
ABC's ratings under review for possible upgrade. Although
debt levels have been reduced, this decline in cash flow raises
the likelihood that normalized operating and free cash flow to debt metrics
will fall within ranges that Moody's believes continue to support
a Ba2 rating.
The Ba2 ratings also reflect ABC's high reliance (85% of
net earnings) on drug distribution -- a sector that continues to
undergo transition due largely to a changing business model. Fee
for service contract negotiations appear to be occurring, but the
lack of clear incentives on the part of manufacturers to move to fee for
service arrangements appear to be prolonging the transition period.
In addition, lack of transparency in negotiated contracts make an
assessment of the impact difficult. In the meantime, we believe
that players in this sector have limited control over key factors affecting
their margins in drug distribution.
Further, we believe that the ratings reflect a relatively aggressive
posture toward shareholder initiatives. The company recently indicated
its intention to accelerate share buybacks under its existing program,
which will bring share total buybacks, thus far in fiscal 2005,
to the $700 million range. We expect ABC to continue using
excess cash generated during the second quarter of fiscal 2005 for either
share buybacks (subject to certain indenture restrictions) or acquisitions.
Recent regulations governing the Medicare Modernization Act of 2003 result
in uncertainty for PharMerica, ABC's institutional pharmacy
division, comprising about 15% of the company's net
earnings. The new regulations appear to recognize the value added
by institutional pharmacies, and we believe that eliminating the
need to negotiate with individual state Medicaid programs could be beneficial
to this sector. However, the new regulations introduce the
addition of risk-taking Prescription Drug Plans (PDPs), which
are likely to be health benefits companies. Under current legislation,
we expect that rebates, which are currently negotiated between manufacturers
and institutional pharmacies, will be moved to the PDP level.
One uncertainty relates to how much leverage and therefore, how
much rebate will be retained by the institutional pharmacies.
The stable outlook assumes that despite declining margins and net income,
ABC should have enough flexibility in its cash position to continue buying
back shares as well as to make a moderate-sized acquisition without
significantly leveraging its balance sheet. Fewer buy opportunities
should result not only in one-time liquidation benefits,
but also less volatile working capital swings. In addition,
because of indenture restrictions, ABC will not be able to use all
of its excess cash for buybacks immediately.
A key factor limiting upside potential is the likelihood that ABC,
along with the rest of the drug distribution sector, will be in
a transition period for a minimum of another 12-18 months.
Prior to a ratings upgrade, ABC must demonstrate its ability to
reverse profitability trends as the company weathers transitions in both
its drug distribution and institutional pharmacy businesses. If
profits and cash flow return to stronger levels and shareholder initiatives
are not likely to result in significant increases in debt, such
that operating cash flow and free cash flow to adjusted debt metrics are
sustainable in the 20% and 15% range, respectively,
the ratings or outlook may be raised.
Given uncertainties facing this sector, should ABC experience further
declines in cash flow or raise debt levels, such that operating
and free cash flow to adjusted debt metrics were to fall below the 15%
and 10% range, respectively, the ratings or outlook
could be lowered.
The upgrade of ABC's speculative grade liquidity rating to SGL-1
from SGL-2 recognizes that during the next year, the company
will not likely need external sources of liquidity due to the significant
one-time boost in operating cash flow. Since the SGL-1
rating takes only a 12-month view of liquidity, we believe
the additional flexibility provided by liquidation of inventory outweighs
recent declines in net income and normalized free cash flow, providing
excellent liquidity over the near term.
AmerisourceBergen Corporation: Ba2 from Ba3 senior unsecured notes;
Ba2 from Ba3 issuer rating; speculative grade liquidity rating to
SGL-1 from SGL-2.
AmerisourceBergen Corporation: Ba2 senior implied rating.
Rating withdrawn (January 3, 2005):
Amerisource Health Corporation: B1 5% convertible subordinated
notes, due 2007.
AmerisourceBergen Corporation, headquartered in Valley Forge,
PA, is one of the nation's leading wholesale distributors
of pharmaceutical products and related services.
Corporate Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.
CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.
All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit 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 or in preparing the Moody’s publications.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.
Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com
under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.
Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.