Two years after taking the helm at Boston Scientific Corp. (NYSE:BSX), CEO J. Raymond Elliott is one step closer to accomplishing one of his major goals in getting the Natick, Mass.-based company’s house in order.
Citing the company’s steady paydown of its debt and “increasingly stable operations,” Fitch Ratings Service upgraded its investment rating on BSX to BBB-. The upgrade lifts the company out of junk bond status and into investment grade. Fitch had raised its outlook on the company back in October of last year.
“We are pleased to achieve an investment grade credit rating from Fitch, and we remain committed to a strong capital structure and improved profitability,” Boston Scientific CFO Jeff Capello said in a prepared release.
The positive ratings action means BSX can reduce some of the borrowing costs on its $2 billion credit facility.
However, it’s also an important victory for the BSX brass because it marks the second of the big three credit ratings agencies to upgrade the company’s debt rating out of the junkyard, where it has been for more than four years now.
In December 2009, Standard & Poor’s Ratings Services was the first agency to raise BSX’s credit rating to investment grade status, which allowed the company to raise some cash to pay down a massive chunk of debt that would have come due in April, 2011.
Recently, Moody’s Investors Service upgraded its outlook for BSX, while re-affirming its Ba1 rating, where it has been since March 2009. Moody’s downgraded the company’s rating back in July 2007 to junk bond status. The company’s rating with Moody’s is still a notch below investment grade, relegating it to junk bond status or, in Wall Street parlance, a “fallen angel.”
Should Moody’s upgrade BSX’s debt rating to investment grade then one of the key goals set out by the BSX brass will have been accomplished.
Elliott inherited a shambling mess when he took over in July 2009 from Jim Tobin. Boston Scientific was saddled with an enormous — and soon-to-be-due — debt load from a $27 billion folly of an acquisition, the 2006 buyout of Guidant Corp., and bleeding market share to competitors in its core stent and cardiac rhythm management businesses.
Elliott, who told analysts on his first conference call that he was “fanatical about cash and sales flow,” was quick to put his stamp on BSX. On top of massive restructuring, he reshuffled the executive deck, replacing more than 75 percent of his senior management team. Boston Scientific paid down more than $2 million of its long-term debt and negotiated the $296 million between Guidant and the U.S. Justice Dept. over faulty implantable defibrillators.