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04 Jun 2010
Approximately $1.6 billion of rated debt affected
New York, June 04, 2010 -- Moody's Investors Service upgraded the senior unsecured debt rating for
Laboratory Corporation of America Holdings (LabCorp) to Baa2 from Baa3.
The rating outlook remains positive.
"The upgrade reflects LabCorp's modest financial leverage,
strong interest expense coverage and robust cash flow generation,"
said Dean Diaz, a Senior Credit Analyst at Moody's.
"The company has continued to see operating and credit metric improvement
due to strong growth in the genomic and esoteric business and cost savings
initiatives," continued Diaz.
The combination of the reduction in leverage from the exercise of the
company's option to redeem a portion of its convertible debt in 2009,
the mitigation of the risk of a potential put of those instruments,
the continued strong operating results and free cash flow generation of
the company that allowed for the acquisition of Monogram Biosciences,
Inc. with available liquidity and the expectation that the company
could complete the level of share repurchases authorized at March 31,
2010 without increasing leverage also support the rating change.
However, the rating also reflects the expectation that the company
will continue to use excess cash to fund acquisitions and share repurchases.
We also expect continued pressure from the broader economic factors that
have impacted the company's drugs of abuse testing business and could
increase exposure to bad debt expense growth.
The positive rating outlook reflects our continued expectation that operating
income and cash flow will remain strong, driven by increases in
top line growth. We believe that the focus on higher margin genomic
and esoteric testing and further cost cutting should continue to offset
the impact of economic pressures and support the company's margin
performance. Furthermore, we believe growth should be supported
by the aging of the population, introduction of new tests,
the growing role of testing in the medical continuum and the convergence
of technologies, such as diagnostic testing, imaging,
information technology and genetic predisposition.
For further details refer to Moody's Credit Opinion for Laboratory Corporation
of America Holdings on moodys.com.
Moody's last rating action was on September 21, 2009, when
we changed the rating outlook to positive from stable and affirmed the
Baa3 unsecured rating of the company.
The principal methodology used in rating LabCorp was Moody's Global Business
& Consumer Service Industry Methodology, published in August
2007 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.
LabCorp, headquartered in Burlington, North Carolina,
is the second largest independent clinical laboratory company in the United
States. The company offers a broad range of clinical laboratory
tests that are used by the medical profession in routine testing,
patient diagnosis, and in the monitoring and treatment of disease.
In addition, the company has developed specialty testing such as
oncology testing, HIV genotyping and phenotyping, diagnostic
genetics and clinical trials. The company recognized approximately
$4.7 billion of revenue in the twelve months ended March
Corporate Finance Group
Moody's Investors Service
Moody's upgrades LabCorp's senior unsecured rating to Baa2; outlook remains positive
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
No Related Data.
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