New York, January 03, 2019 -- Moody's Investors Service ("Moody's") placed the
ratings of Bristol-Myers Squibb Company ("Bristol")
under review for downgrade, including the A2 senior unsecured long-term
rating and the Prime-1 commercial paper rating. This rating
action follows the announcement that Bristol will acquire Celgene Corporation
("Celgene") in a transaction valued at approximately $74
billion plus debt and contingent value rights. The acquisition
is subject to regulatory reviews and shareholder approvals and is expected
to close in the third quarter of 2019.
The review for downgrade reflects higher financial leverage resulting
from the acquisition, as well as pipeline execution risk and integration
risks. Moody's anticipates that pro forma debt/EBITDA at
the time the acquisition closes will be close to 4.0x. However,
significant deleveraging opportunities will arise from earnings growth
and free cash flow, a portion of which Moody's believes Bristol
will use to repay debt. As a result, Moody's anticipates
debt/EBITDA will decline below 3.0x within two years of the deal's
close.
The review will focus on the benefits of the transaction including a stronger
position in oncology, an improved revenue growth outlook,
a stronger pipeline, and cost synergies. The review will
also consider higher financial leverage, product concentration risk,
and pipeline execution risks. All other factors being equal,
Moody's currently anticipates that the outcome of the review will
be a one-notch downgrade of the long-term rating to A3 from
A2, and a downgrade of the commercial paper rating to Prime-2
from Prime-1. This assumes no material changes in either
company's credit profile prior to the close of the transaction.
This also assumes that Bristol will structure its debt obligations to
limit structural subordination by making substantially all the Bristol
and Celgene debt pari passu.
On Review for Downgrade:
..Issuer: Bristol-Myers Squibb Company
....Senior Unsecured Bank Credit Facility,
Placed on Review for Downgrade, currently A2
....Senior Unsecured Commercial Paper,
Placed on Review for Downgrade, currently P-1
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Downgrade, currently A2
....Backed Revenue Bonds, Placed on
Review for Downgrade, currently A2
....Backed Revenue Bonds, Placed on
Review for Downgrade, currently P-1
....Senior Unsecured Shelf, Placed on
Review for Downgrade, currently (P)A2
....Subordinated Shelf, Placed on Review for Downgrade,
currently (P)A3
....Preferred Shelf, Placed on Review for Downgrade,
currently (P)Baa1
Outlook Actions:
..Issuer: Bristol-Myers Squibb Company
....Outlook, Changed To Rating Under
Review From Stable
RATINGS RATIONALE
Bristol's A2 rating (under review for downgrade) reflects the company's
large scale with $22 billion of revenue and its solid position
in immuno-oncology. Bristol has a long history of conservative
financial policies, with debt/EBITDA typically maintained below
2.0x, with high cash levels. Products like Opdivo,
Eliquis and Orencia have solid growth outlooks.
These strengths are tempered by rising revenue concentration in Opdivo
and Eliquis, which currently comprise over half of Bristol's
revenue. In addition, the immuno-oncology market is
highly competitive with Opdivo recently losing its top position to Merck
& Co., Inc.'s Keytruda, driven by
share loss in lung cancer. Outside of oncology, patent expirations
for several antiviral drugs will dampen Bristol's overall growth
and reduce diversity.
Headquartered in New York, New York, Bristol-Myers
Squibb Company ("Bristol") is a leading global pharmaceutical company
with strong positions in oncology, cardiovascular disease,
and immunology. Annual revenues total approximately $22
billion.
The principal methodology used in these ratings was Pharmaceutical 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.
Michael Levesque, CFA
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
Jessica Gladstone
Associate Managing Director
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