Moody's reviews Omnicare

Moody's Investors Service said it placed Omnicare, Inc.'s Ba3 corporate family and probability-of-default ratings under review for downgrade following the company's plans to purchase PharMerica stock for $15 per share or about $716 million, including net debt.

Also on review are the company's unsecured term loan A at Baa3 (LGD2, 14%), unsecured revolver at Baa3 (LGD2, 14%), senior subordinated notes at Ba3 (LGD4, 53%) and convertible senior notes at B2 (LGD5, 84%); Omnicare Capital Trust I's Piers Trust Preferreds at B2 ( LGD6, 94%); and Omnicare Capital Trust II's Piers trust preferreds at B2 (LGD6, 94%).

"Omnicare's ratings, which currently have a negative outlook, do not reflect any large debt-financed acquisitions especially since leverage remains high relative to our expectations," Diana Lee, a senior credit officer at Moody's, said in a statement.

Omnicare's current Ba3 corporate family rating incorporates expectation that the company will continue to see improvement in operating performance, the agency noted.

Because of uncertainty associated with the reimbursement environment for long-term care pharmacy operators, the ratings assume that Omnicare's credit metrics will trend toward those above a Ba3 rating level, including a debt-to-EBITDA ratio of less than 3.5 times.

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