NEW YORK Aug 3 Standard & Poor's and Fitch Ratings on Friday cut their ratings on Boston Scientific Corp. (BSX.N) into junk territory, citing the company's decision to retain its endosurgery business after looking into selling a minority stake through an initial public offering.
"We believe we can create more shareholder value with the endosurgery group remaining wholly owned by Boston Scientific, and we have concluded that an IPO would have reduced -- rather than enhanced -- Boston Scientific's shareholder value," Chief Executive Jim Tobin said in a statement on Thursday. For details, see [ID:nN02444446]
Saddled with debt after its $27 billion acquisition of Guidant Corp. and hampered by slowing sales of its most lucrative heart devices, the company said in March it was exploring the partial sale for more than $1 billion.
"Fitch's prior rating for BSX was highly dependent on the timely paydown of debt with cash proceeds from the potential divestiture," Fitch said in a statement. "More pressure has now been placed on BSX's operations, which are currently challenged, to reduce debt and leverage."
Both Fitch and S&P cut Boston Scientific's senior unsecured debt one notch to "BB-plus," one level below investment grade, from "BBB-minus."
S&P has the company on watch for an additional downgrade while Fitch has a negative outlook on the company, indicating an additional cut is likely over the next one to two years.
"Although Boston Scientific still plans to sell nonstrategic assets, divest elements of its investment portfolio, and reduce expenses and headcount, debt reduction will proceed at a slower pace than previously anticipated," S&P said in a statement.