S&P Places Cardinal Health Shares On Review For Possible Downgrade After $6.1 Billion Deal

By Ciara Linnane Markets MarketWatch Pulse

Standard & Poor's placed ratings on Cardinal Health Inc. on review for a possible downgrade, after the Dublin, Ohio-based drugs and medical supplies company said it was buying a unit of Medtronic Plc for $6.1 billion. The deal is "a transaction that is meaningfully larger than the tuck-ins we had anticipated," the rating agency wrote in a note. Cardinal Health is planning to fund the deal with a $4.5 billion bridge loan and $1.6 billion of cash. "We expect leverage will rise materially to the high-2 times area from 1.4 times as of Dec. 31, 2016," said S&P. The agency rates Cardinal Health at A-minus, but would likely lower that to BBB-plus, based on the proposed financing terms, it said. It expects to resolve the action once the deal closes. Earlier, Fitch revised its outlook on the company's rating to negative, also citing concerns about leverage. Cardinal Health's most active bonds, the 1.70% notes due March of 2018, were trading at 100 cents on the dollar, according to MarketAxess. Shares fell 11.6%, while the S&P 500 was flat.

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