Boston Scientific (NYSE:BSX) kept its long-term bond rating out of junk status after Fitch Ratings yesterday affirmed its BBB- rating and stable outlook for the medical device company.
After spending a few years at junk bond status, ratings agencies in 2009 began upgrading Boston Scientific’s long-term debt rating as it dug itself out of the shadow of its $27 billion Guidant acquisition.
Standard & Poor’s, Moody’s Investors Service and Fitch all boosted their outlooks to just under investment grade during the spring of that year; by the end of the year Standard & Poor’s had raised its rating to investment grade. Fitch followed suit in 2011, but Moody’s held out until 2012.
Yesterday Fitch said it predicated its rating on Boston Scientific’s roughly $4.25 billion in debt on "relatively stable leverage (total debt/EBITDA) of 2.3x-2.5x during the next 12 months, despite a challenging operating environment," but cautioned that Boston has only "modest flexibility" within the BBB- rating.
"Fitch forecasts that BSX’s improving operational performance will generate consistently solid [free cash flow], given relatively manageable [capital expenditure] requirements. BSX is expected to maintain adequate liquidity through revolver availability and access to the capital markets," according to a press release. "BSX’s implantable cardioverter defibrillator (ICD) and drug-eluting stent (DES) segments are expected to gradually improve, as (i) procedure volumes stabilize, (ii) the company introduces new products into the space that offer opportunities for incremental share gains and margin support and (iii) growth in emerging markets begins to contribute more significantly to revenues."
Fitch said it expects the rest of Boston Scientific’s business, accounting for about 63% of total sales, to deliver "solid single-digit" growth.