S&P changes Guidant watch to developing

Standard & Poor's said it revised the CreditWatch implications on its ratings for Guidant Corp. (A- long-term corporate credit rating and A-2 short-term rating) to developing from positive.

The ratings on developing watch include Guidant's corporate credit rating at A-, unsecured bank loan at A-, senior unsecured debt at A- and commercial paper at A-2.

Ratings were placed on CreditWatch with positive implications on Dec. 16, 2004 due to the plan by Johnson & Johnson (AAA/stable/A-1+) to acquire the company.

Although the Federal Trade Commission conditionally approved the merger Wednesday, Johnson & Johnson said it would terminate the $25.4 billion transaction unless Guidant agrees to renegotiate the terms of the deal, S&P said.

J&J believes that recent product recalls and related litigation challenges faced by Guidant could constitute a material adverse development, S&P said.

If the acquisition does go through, S&P said the ratings on Guidant will be raised to the level of those of J&J. But if the deal is terminated, S&P said the ratings on Guidant could be lowered due to concerns regarding the company's ongoing product problems and future sales.

J&J has 48 hours following the FTC approval to either close the agreement or kill the deal.

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