TEXT-S&P may raise PSS World Medical
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.
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