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01 Dec 2010
Outlook remains stable
New York, December 01, 2010 -- Moody's Investors Service assigned a Baa1 rating to St. Jude Medical's
new $500 million senior note offering. The notes,
which will be drawn from the company's WKSI shelf, are expected
to be used for general corporate purposes, including share buybacks
and the repayment of debt associated with the acquisition of AGA Medical.
At the same time, Moody's affirmed St. Jude's
Baa1 long-term debt ratings and its Prime-2 short-term
rating. The rating outlook remains stable.
"The assumption of incremental debt was anticipated in conjunction
with the AGA Medical acquisition," said Diana Lee, a
Senior Credit Officer at Moody's. This was a key driver behind
the change in St. Jude's rating outlook to stable from positive.
Based on financial results for the twelve months ended October 2,
2010, on a pro-forma basis, including incremental borrowings
associated with the AGA acquisition and subsequent share buyback initiatives,
certain credit metrics are expected to be in the high-"Baa" range,
including CFO/Debt (at about 38%) and Debt/EBITDA (estimated at
1.9 times). The stable outlook anticipates that credit metrics
will return to low-"A" levels, which is consistent with our
expectation for St. Jude's Baa1 rating. In addition,
the outlook incorporates our expectation that St. Jude will not
utilize high levels of short-term borrowings to fund future cash
St. Jude's Baa1 ratings consider the company's high
concentration in CRM products, which have been challenged by low
single digit market growth rates. After experiencing modest growth
in 2009, St. Jude's core cardiac rhythm management
(CRM) division returned to better than market growth rates due in part
to new product launches and a recall of a competitor's product.
The recently completed acquisition of AGA Medical - which has enjoyed
strong growth rates - should better position St. Jude as
a leading player in the structural heart market.
If the company continues to make large debt-financed acquisitions
or buybacks such that credit metrics are only sustained in the "Baa"
range, the ratings could come under pressure. If, however,
St. Jude maintains lower debt levels, and enjoys above market
growth rates so that credit metrics can be sustained at least at the mid-"A"
level, the outlook or ratings could improve.
Baa1 new $500 million senior unsecured notes
St. Jude Medical:
Baa1 existing senior unsecured notes
(P)Baa1 senior unsecured shelf
Prime-2 short-term rating
The last rating action for St. Jude Medical was on March 10,
2010, when Moody's assigned a Baa1 rating to a new note offering.
For additional information, please see Moody's credit opinion for
St. Jude Medical on www.moodys.com.
The principal methodology used in rating St. Jude Medical was Moody's
Global Medical Products and Device Methodology, published in October
2009 and available on www.moodys.com in the Rating Methodologies
sub-directory under the Research & Ratings tab. Other
methodologies and factors that may have been considered in the process
of rating this issuer can also be found in the Rating Methodologies sub-directory
on Moody's website.
St. Jude Medical, headquartered in Minneapolis, Minnesota,
is a leading manufacturer of medical devices used in the treatment of
cardiac disease. The company generated approximately $5.0
billion in revenues for the twelve months ended October 2, 2010.
Lenny J. Ajzenman
Senior Vice President
Corporate Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns Baa1 to St. Jude Medical's new notes
250 Greenwich Street
New York, NY 10007
No Related Data.
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