November 27, 2012 / 3:50 PM / in 5 years

TEXT - S&P says Baxter rating not hurt by acquisition news

Nov 27 - Standard & Poor’s said today that its ratings on Baxter International Inc. are not currently affected by reports that the company could make a large debt-financed acquisition. The Wall Street Journal reported that Baxter is in discussions to acquire Gambro, a medical device company specializing in kidney dialysis products, for $4 billion. Our ratings incorporate capacity for midsize acquisitions that modestly increase debt. However, our rating outlook states that debt-financed acquisitions or share repurchases that increase adjusted debt leverage to 2x (without expectations of rapid deleveraging) could result in a downgrade. Baxter’s adjusted debt leverage has been rising modestly over the past year to 1.9x for the 12-month period ended Sept. 30, 2012, from 1.5x for the comparable 2011 period. Contributing to the rise was an August 2012 $1 billion issuance to pre fund construction of a plasma fractionation facility in Covington, Georgia. The ratings on Baxter reflect its “strong” business risk profile as a leading manufacturer of diversified and relatively noncyclical medical products, sustained by extensive worldwide operations, solid distribution channels, a very large and entrenched customer base, and low-cost manufacturing. Baxter’s “modest” financial risk profile reflects a conservative balance sheet, stable recurring revenues from consumables and disposables, and strong liquidity.

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