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Announcement:

Moody's raises Boston Scientific's SGL to SGL-1 from SGL-3; affirms ratings on news of divestiture

Global Credit Research - 29 Oct 2010

Stable outlook

New York, October 29, 2010 -- Moody's Investors Service raised Boston Scientific Corporation's Speculative Grade Liquidity rating to SGL-1 from SGL-3 following the announcement that the company has entered into a definitive agreement to sell its neurovascular business to Stryker for about $1.5 billion. At the same time, Moody's affirmed Boston Scientific's existing debt ratings and the stable rating outlook.

The upgrade to an SGL-1 rating reflects expectations of very good liquidity following the sale of this asset. Substantial sale proceeds and solid cash flow generation should allow the company to fund basic operating needs, including upcoming debt maturities, with internal cash sources. The presence of an undrawn, $2 billion multi-year revolver and $350 million AR facility - coupled with better covenant cushions - also contributes to an improved liquidity profile.

Although Boston Scientific is exiting an area that does have higher market growth potential, Moody's views positively the allocation of 50% of sale proceeds toward debt repayment.

However, despite management's ongoing commitment to reducing debt levels, the company continues to face near and intermediate term challenges in its cardiac rhythm management (CRM) and cardiovascular business lines, including the need to avoid further market share erosion by obtaining FDA approval of its Promus Element drug eluting stent (DES) by mid-2012. Boston Scientific has earmarked the remaining after-tax sale proceeds for acquisition activity, which we anticipate will increase as the company seeks to restructure its portfolio to supplement weak growth rates in its core businesses.

"The neurovascular sale could help Boston Scientific get back on track with its previously articulated deleveraging goals, but uncertainties in its core business lines remain," said Diana Lee, a Moody's Senior Credit Officer.

Boston Scientific's Ba1 Corporate Family Rating reflects its large revenue base and diverse product lines - even after this divestiture - relative to other "Ba"-rated companies. However, the rating also considers moderately high leverage, reliance on modestly growing markets, declining sales trends related to a ship-hold action in CRM as well as competition and pricing pressure in cardiovascular product lines including DES, and outstanding litigation.

Factors that could support an upgrade include improved sales trends in its CRM, DES and other cardiovascular businesses, as well as further deleveraging so that Debt/EBITDA can be sustained well below 3.0 times. In addition, financial strength metrics should be sustained comfortably within Moody's "Baa" ranges.

Conversely, factors that could result in pressure on the ratings or outlook include continued sales declines and impairment in cash flows, large acquisitions or negative litigation outcomes that result in higher leverage, or setbacks in seeking U.S. approval of the Promus Element stent.

The last rating action for Boston Scientific was taken on February 1, 2010 when Moody's affirmed the company's Ba1 ratings and stable outlook in conjunction with the announced litigation settlement with J&J.

Ratings affirmed:

Boston Scientific Corporation:

Corporate Family Rating at Ba1

Senior unsecured notes at Ba1, LGD4, 51%

Senior shelf securities at (P)Ba1

PDR at Ba1

Rating changed:

Speculative Grade Liquidity rating to SGL-1 from SGL-3

Please see Moody's credit opinion on Boston Scientific on www.moodys.com.

The principal methodology used in rating Boston Scientific was Moody's Global Medical Products & Device Industry 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.

Boston Scientific Corporation, headquartered in Natick, Massachusetts, is a worldwide developer, manufacturer and marketer of medical devices, specializing in a broad range of interventional and cardiac rhythm management devices.

New York
John Diaz
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Diana Lee
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.

Moody's raises Boston Scientific's SGL to SGL-1 from SGL-3; affirms ratings on news of divestiture
No Related Data.
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