CHICAGO - (Business Wire) Fitch Ratings has assigned an 'A' rating to Baxter International Inc's. (Baxter) proposed debt offering of 10-year senior unsecured notes. Baxter intends to use the net proceeds from the sale for general corporate purposes, including the refinancing of outstanding indebtedness. The ratings reflect Baxter's strong operating performance and credit metrics. EBITDA margins continue to improve due to pricing gains and improving product mix. The company is generating profitable growth in its Bioscience and Medication Delivery segments, while growth in Renal has been in the low single-digit range. An improving sales mix towards newer, value-added products is helping to expand margins. Fitch expects continued progress with the commercialization of pipeline products will provide for longer-term growth and margin support. As such, Fitch also expects long-term growth in operational cash flow and free cash flow (FCF).
Select manufacturing issues present headline risk, although Fitch does not believe these issues will affect Baxter's credit rating. Baxter generates roughly 59% of its business internationally. Any adverse changes to tax policy towards international earnings could affect the company's cash flow.
Fitch's expects Baxter's FCF will be used for acquisitions and share repurchases, and dividends will continue to increase in order to remain competitive with its peers. FCF for the latest 12-month period (LTM) ended June 30, 2009 was approximately $915 million, and cash at June 30, 2009 was $1.8 billion.
On June 30, 2009, Baxter had no borrowings on its $1.5 billion credit facility maturing in 2011 and its $410 million credit facility maturing in 2013, while $200 million of commercial paper was outstanding. Total debt on June 30, 2009 was $3.8 billion. The company had approximately $668 million of long-term debt maturing in 2010, $147 million in 2012 and $350 million in 2014. For LTM ended June 30, 2009, Baxter's EBITDA/gross interest was 23.4 times (x); total debt/EBITDA was 1.10x.
Fitch rates Baxter International Inc. as follows:
--Issuer Default Rating (IDR) 'A';
--Senior unsecured notes 'A';
--Bank credit facility 'A';
--Commercial paper 'F1.
The Rating Outlook is Stable.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings, Chicago
Bob Kirby, +1-312-368-3147
Lauren Coste, +1-312-606-2320
Media Relations, New York
Cindy Stoller, +1-212-908-0526
cindy.stoller@fitchratings.com
