TEXT-S&P may raise PSS World Medical

Fri Oct 26, 2012 3:09pm EDT

Overview
     -- San Francisco-based McKesson Corp. (A-/Stable/A-1), a major wholesaler 
of medical products, signed a definitive agreement to acquire PSS World 
Medical (PSS) for about $2.1 billion (including the assumption of its debt).
     -- As a result, we have placed our 'BB-' issue-level rating on PSS' two 
senior unsecured debt issues on CreditWatch with positive implications.
 
Rating Action
On Oct. 26, 2012, Standard & Poor's Ratings Services placed its 'BB-' 
issue-level rating on the senior unsecured debt of PSS World Medical   
on CreditWatch with positive implications. The recovery rating on this debt 
remains '6', indicating negligible (0% to 10%) recovery for noteholders in the 
event of a payment default. We expect this transaction to result in our 
withdrawal of the corporate credit rating on PSS at close.

Rationale
The CreditWatch placement follows the announcement that McKesson signed a 
definitive agreement to acquire PSS. The placement reflects our expectation 
that we would raise our issue-level ratings on PSS' debt if it is assumed by 
higher-rated McKesson.

CreditWatch
The acquisition might result in an upgrade of the debt ratings to 'A-', in 
line with McKesson's senior unsecured debt. However, the repayment of PSS' 
relatively high-cost debt would most likely lead to our withdrawal of the 
issue-level ratings.

Related Criteria And Research
     -- Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18, 
2012
     -- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
     -- Use Of CreditWatch And Outlooks, Sept. 14, 2009
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
     -- 2008 Corporate Criteria: Rating Each Issue, April 15, 2008
     -- 2008 Corporate Criteria: Ratios And Adjustments, April 15, 2008
 
Ratings List

Ratings Affirmed

PSS World Medical Inc.
 Corporate Credit Rating                BB+/Negative/--    

CreditWatch Action
                                        To                 From
PSS World Medical Inc.
 Senior Unsecured                       BB-/Watch Pos      BB-
   Recovery Rating*                     6                  6

*Standard & Poor's does not place its recovery ratings on CreditWatch; 
however, this does not preclude our recovery assessment from potentially 
changing in the future.