The Wall Street Journal writes that Moody’s may soon downgrade Boston Scientific’s (BSX) bonds to junk status. As the Journal points out, the company said that its cash flow after the merger with Guidant would hit $2.5 billion a year. It is running less than half of that.
Boston Scientific’s hope that its bonds can hold their current rating falls under the "if wishes were horses, all the beggars would ride" category. The stent business that is critical to the company’s growth is simply falling apart too quickly. Doctors have become concerned about the product liability of stents that may cause clots. The MD’s aren’t coming back.
There are also problems with Guidant cardiac products that could force an expensive legal settlement.
Boston Scientific is really only left with two options. It can raise money or cut costs to the bone. Most shareholders would probably hope for the latter.
Douglas A. McIntyre can be reached at [email protected]
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