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Rating Action:

Moody's puts Hospira's Baa3 rating on review for downgrade

Global Credit Research - 22 May 2013

New York, May 22, 2013 -- Moody's Investors Service placed Hospira, Inc.'s Baa3 long-term debt rating on review for downgrade. This action follows the FDA's new warning letter related to an inspection of the company's device operations at its Lake Forest site and the company's release of its new medical device strategy and revised guidance for fiscal 2013 earlier this month.

Rating under review:

Hospira, Inc.

Baa3 senior unsecured notes

RATINGS RATIONALE

Moody's believes that Hospira's operating performance over the next few years remains uncertain due in large part to ongoing regulatory matters and the company's new medical device strategy, which will simplify its product line and will entail swapping out infusion pumps for a portion of its existing customers. Cash payouts associated with this strategy, remediation costs and the potential for lost sales once its branded injectible sedative, Precedex, loses patent protection could increase the likelihood of tighter liquidity and weaker credit metrics over a more protracted period of time. The FDA's recent warning letter related to an inspection at Hospira's Lake Forest development site -- which is the company's third outstanding warning letter -- steps up regulatory uncertainties. At this time, however, it does not appear that Hospira has received any formal feedback on its ongoing remediation efforts at Rocky Mount. Moody's believes that the newly amended credit facility will provide some additional cushion on covenants.

Moody's rating review will consider: (1) how ongoing remediation efforts will affect future production levels and sales at Rocky Mount; (2) potential effects from recent regulatory actions; (3) additional regulatory developments or feedback on remediation efforts at Rocky Mount or the company's medical device strategy or facilities; (4) timing of cash expenses associated with the medical device strategy; (5) the potential effect of Precedex facing generic competition in early 2014; and (6) what is likely to be sustainable cash flow and EBITDA over the next 2-3 years.

The principal methodology used in this rating was Global Medical Product and Device Industry published in October 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Hospira, Inc., headquartered in Lake Forest, Illinois, is a leading manufacturer of hospital products, including specialty injectable pharmaceuticals and medication delivery systems. During the twelve months ended March 31, 2013, Hospira generated revenues of around $4 billion.

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 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 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 rating action, and whose ratings may change as a result of this 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.

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.

Diana Lee
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

Peter H. Abdill, CFA
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 puts Hospira's Baa3 rating on review for downgrade
No Related Data.

 

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