Moody's rates Merck loans A1

Moody's Investors Service said it assigned a rating of A1 to the new senior unsecured credit facilities of Merck & Co., Inc.

The credit facilities are comprised of a $2 billion 364-day credit agreement due in May 2012 and a $2 billion four-year credit agreement expiring in May 2015.

The new facilities replace a 364-day facility that expired in May 2011 and a five-year $2 billion credit agreement expiring in August 2012, which now has been terminated.

The outlook is stable.

The majority of Merck's debt continues to be rated Aa3, benefiting from upstream guarantees from Merck Sharp & Dohme Corp., a key subsidiary, Moody's said.

The ratings reflect the company's strong competitive position in the global pharmaceutical industry, its high profitability and historically strong cash flow and balance sheet ratios due to conservative financial policies, the agency said.

Although Merck's credit metrics continue to reflect the erosion resulting from higher debt levels since the 2009 acquisition of Schering-Plough, the acquisition resulted in improved scale and diversity, reduced exposure to patent expirations and contributed to a solid late-stage pharmaceutical pipeline, Moody's said.

However, a key challenge for Merck will be to maintain strong performance in the face of recent generic competition for certain key products, as well as the approaching loss of U.S. exclusivity for Singulair in August 2012, the agency said.

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