A surprising ratings agency call is helping Boston Scientific Corp. (NYSE: BSX) after the company made a debt issuance filing. As Boston Scientific is (and has been for ages) a turnaround which hasn’t turned around, this may be a very positive development for the company. Both Fitch and Moody’s have kept Boston Scientific in junk territory after the proposed issuance of $1 billion in unsecured notes. Fitch has given the company a rating of “BB+” with a positive outlook and while Moody’s rated these new notes “Ba1” with a stable outlook. Standard & Poor’s is the standout call today as its call takes Boston Scientific out of junk status. The new “investment grade” rating is “BBB-” for its corporate credit rating and for the unsecured notes.
S&P noted that Boston Scientific has continued to maintain or grow share in its key markets, while generating strong cash flows and paying down debt leverage with staggering out debt tranches. S&P noted that the bond traunches filed will be issued in 5-year and 10-year maturities. S&P did note that this leaves $2.6 billion in obligations remaining that need to be refinanced or paid off after this $1 billion refinancing.
S&P also believes that the company will continue to make progress on its debt refinancings well ahead of the 2011 maturities and believes that product diversity will generate revenue and cash flow growth even if there are setbacks in a product line. International sales are about 42% of revenues and the cardiac rhythm management accounted for 31% and cardiovascular group represented 43% of sales in the first three quarters of 2009.
S&P has put the outlook now at “stable” after it had been at positive. The other ratings agencies having a positive bias leaves the door open for a Moody’s and/or fFitch upgrade in the coming months. That would make the company’s debt and corporate credit rating “investment grade” at the other agencies as well if those positive outlooks turn into formal upgrades.
Boston Scientific shares are trading up 2% at $8.65, and is 52-week trading range is $6.08 to $11.77.
JON C. OGG
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