Reply #26: Moody's Cuts Merck Debt Rating

[54anickel]

http://www.thestreet.com/_tsclsii/stocks/biotech/10205891.html

Merck (MRK:NYSE - news - research) received another negative vote from a credit-rating firm Thursday after Moody's Investors Service knocked down by one notch the company's senior unsecured notes.

Approximately $4.9 billion in debt will be affected by Moody's decision to cut the rating to Aa2 from Aa3. The rating outlook is negative.

In recent months, the three major credit-rating agencies -- Moody's, Standard & Poor's, and Fitch -- have cut Merck's ratings, which once were highest rated. In November, Moody's cut Merck's rating to Aa2 from the top-rated Aaa.

Moody's cut the rating Thursday because it believes Merck's free cash flow "will likely erode over the next several years at a time when the company faces uncertain but potentially very high legal exposures related to Vioxx." Merck withdrew the arthritis drug from the market on Sept. 30. The potential legal liability is a source of intense study and speculation among equity analysts and credit-rating firms.

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