Fitch might cut Baxalta

Fitch Ratings said it placed the ratings of Baxalta Inc., including the BBB+ long-term issuer default rating, on Rating Watch Negative.

The action follows Baxalta's announcement that it agreed to be acquired by Shire plc for roughly $32 billion, including $12 billion in cash and $20 billion in Shire stock.

The actions apply to roughly $5 billion of debt as of Sept. 30, 2015.

The cash component of the purchase price will initially be financed with a new $18 million one-year term loan that Shire plans to refinance fairly quickly. Fitch estimates that initial pro forma gross leverage without synergies could be roughly 4.7 times, which is significantly higher debt leverage than both Baxalta's projected stand-alone levels of roughly 2.5 times for full-year 2015 and the longer-term run rate of roughly 2.25 times that Fitch views as supportive of current BBB+ ratings for a firm with Baxalta's stand-alone business profile.

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