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Rating Action:

Moody's downgrades Becton, Dickinson and Company to speculative grade

28 Dec 2017

NOTE: On January 3, 2018, the press release was corrected as follows: In the first paragraph, the fourth sentence was changed to “Additionally, Moody's affirmed the Ba1 (LGD 4) ratings on debt securities and a bank credit facility that were issued earlier in 2017 to pre-fund the Bard acquisition.” Revised release follows.

New York, December 28, 2017 -- Moody's Investors Service, ("Moody's") today downgraded Becton, Dickinson and Company (BD) to speculative grade and assigned a Ba1 Corporate Family Rating and a Ba1-PD Probability of Default Rating. Moody's downgraded the company's senior unsecured notes to Ba1 (LGD 4) from Baa2 (review for downgrade) and its commercial paper rating to Not Prime from Prime-2. Moody's also assigned a Speculative Grade Liquidity Rating of SGL-1. Additionally, Moody's affirmed the Ba1 (LGD 4) ratings on debt securities and a bank credit facility that were issued earlier in 2017 to pre-fund the Bard acquisition. The rating outlook is stable. Today's rating actions conclude the review for downgrade that commenced on April 23, 2017.

"The rating downgrade results from the expected completion of BD's acquisition of C.R. Bard, Inc. ("Bard") following receipt of all requisite approvals in a transaction that initially valued Bard at approximately $25.2 billion," stated Scott Tuhy, a Senior Vice President at Moody's. The transaction resulted in BD's debt load nearly doubling (including assumed debt issued by Bard) and pro-forma leverage (debt/EBITDA) near five times. BD has articulated that it expects to reduce debt/EBITDA (as defined by the company) below three times within three years of closing. "However we believe that BD will have limited flexibility to deviate from its deleveraging plans, and returning to investment-grade levels will take longer than what we feel is acceptable for the prior rating," added Mr. Tuhy.

The following ratings were downgraded:

Issuer: Becton, Dickinson and Company

Senior Unsecured Commercial Paper to Not Prime from Prime-2

Senior Unsecured Regular Bond/Debenture to Ba1 (LGD 4) from Baa2

Ratings Assigned:

Issuer: Becton, Dickinson and Company

Corporate Family Rating at Ba1

Probability of Default Rating at Ba1-PD

Speculative Grade Liquidity Rating at SGL-1

Ratings Affirmed:

Issuer: Becton, Dickinson and Company

Senior Unsecured Bank Credit Facility at Ba1 (LGD 4)

Senior Unsecured Regular Bond/Debenture at Ba1 (LGD 4)

Ratings Withdrawn:

Issuer: Becton, Dickinson and Company

Issuer Rating at Baa2

The outlook on all ratings is stable

RATINGS RATIONALE

BD's Ba1 Corporate Family Rating reflects its high financial leverage with debt/EBITDA near five times at the closing of the Bard acquisition. The ratings reflect the company's meaningful scale in the medical device industry with pro-forma revenues exceeding $16 billion and global reach with approximately 45% of sales generated outside the United States. The combined firm is well diversified with market leading positions across multiple product categories. The acquired Bard business is highly complementary to BD's existing product lines and Moody's believes the company's cost saving targets ($300 million of cost savings by fiscal 2020) are achievable. The rating also reflects the company's aggressive acquisition strategy, evidenced by announcing the $25.2 billion acquisition of Bard approximately two years after closing the $12.5 billion acquisition of CareFusion.

The rating outlook is stable. Moody's expects that BD will successfully integrate Bard and will substantially achieve cost synergy targets. Moody's also expects the company to use free cash flow to reduce debt, as BD progresses toward its articulated leverage target of debt/EBITDA below three times.

Ratings could be upgraded if the company successfully integrates Bard while meaningfully reducing leverage and Moody's expects BD's financial policies to be consistent with an investment grade profile. Quantitatively, ratings could be upgraded if Moody's expects debt/EBITDA to be sustained below 3.5 times.

Ratings could be downgraded if the company encounters problems integrating Bard or if the company pursues meaningful debt-financed acquisitions while leverage remains at elevated levels. Quantitatively, ratings could be downgraded if Moody's expects debt/EBITDA to be sustained above four times beyond two years of closing the Bard acquisition.

Becton Dickinson, headquartered in Franklin Lakes, New Jersey, is a medical technology company that manufactures a broad array of medical products, laboratory equipment and diagnostic products. In December 2017 BD acquired C.R. Bard, Inc. a manufacturer of medical, surgical and diagnostic devices used for vascular, urology, oncology, and surgical specialties. Pro-forma revenues exceed $16 billion.

The principal methodology used in these ratings was that for the Medical Product and Device Industry published in June 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Scott Tuhy
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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