Medtronic (NYSE:MDT) said today that it plans to assume some $16 billion in U.S. debt to help pay for its $43 billion acquisition of Covidien (NYSE:COV), slated to close late this year or early in 2015.

The Fridley, Minn.-based medical device company had planned to use about $13.5 billion in overseas cash for the merger, but new U.S. Treasury rules instituted last month prompted it to change the structure of the deal.

In a regulatory filing today, Medtronic said the new debt, at a rate of 4.0% to 4.5%, is expected to be in place before the deal closes. The company is targeting an "A" credit rating on the debt, which would keep it out of junk bond status.

Standard & Poor’s, which has a negative credit watch on Medtronic, reiterated the watch Oct. 3 on news of the new debt financing plan.

"We now expect to lower the corporate credit rating and the issue-level ratings by 2 notches, to ‘A’ and to lower the short-term rating to ‘A-1’, if the transaction is consummated as expected," the ratings agency said.

Standard & Poor’s had said it expects Medtronic’s pro forma adjusted net leverage ratio to be about 2x to 2.2x after the deal. Today Medtronic said its pro forma net debt to EBITDA would be 1.9x at closing and move to 0.7x in fiscal 2018, with pro forma gross debt to EBITDA at 3.7x at closing before moving to 2.7x in fiscal 2018 and to 2.3x beyond that.

In its Oct. 3 release, Standard & Poor’s said the new debt would mean "a modest increase in net leverage (per our calculations), relative to our prior expectations, due to the haircut we apply to cash balances."

Medtronic also said the deal would be neutral to earnings in fiscal 2019, rather than in fiscal 2018 as previously expected, but will be accretive on a cash EPS basis in fiscal 2016 with "significant accretion thereafter." The deal will also lower Medtronic’s overall tax rate by 2%, according to the filing.