Moody's affirms Alpharma

Moody's Investors Service said it affirmed the ratings of Alpharma Inc. (B2 senior implied) following the recent disclosure of several material weaknesses in its internal financial controls. The outlook is stable.

Moody's affirmed Alpharma Inc.'s B3 rated 8 5/8% guaranteed senior unsecured notes due 2011 and Caa1 senior unsecured issuer rating and Alpharma Operating Corp.'s B1 rated senior secured revolving credit facility due 2007, senior secured term loan A due 2007 and senior secured term loan B due 2008.

Alpharma recently disclosed three material weaknesses in its internal financial controls related to customer discount reserves and certain accrual accounts at the U.S. generics business, income tax accounts and the determination of proper segment disclosure that led to a recent restatement to disaggregate previously segmented results.

Although these issues combined with the recent change in external auditors are concerning, Moody's said it believes that the company remains appropriately positioned at B2 senior implied, reflecting prospects for continued deleveraging.

Moody's said Alpharma faces various operating challenges in its core businesses, but has continued to generate free cash flow and to significantly deleverage its balance sheet.

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