S&P may downgrade Guidant

Standard & Poor's said it revised the CreditWatch implications on its ratings for Guidant Corp. (A- corporate credit rating) to negative from developing, reflecting the company's announcement to terminate its merger agreement with Johnson & Johnson (AAA/stable/A-1+) and enter into a merger agreement with Boston Scientific Corp. (A/negative watch/A-1).

Boston Scientific will pay about $27 billion for Guidant and plans to sell the company's vascular intervention and endovascular businesses to Abbott Laboratories (AA/stable/A-1+) for $4.1 billion.

Ratings on Guidant's $350 million 6.15% senior notes due Feb. 15 were removed from CreditWatch, given the strong likelihood that they will be repaid before the CreditWatch listing is resolved.

S&P said that Guidant's fourth-quarter earnings, which were lower than expected due to product recalls, add uncertainty to its ability to regain lost market share in a timely manner. The expected level of cash flow generation and attendant debt paydown will be key considerations in determining the creditworthiness of the combined entity. Boston Scientific will incur about $9 billion of additional debt to finance the transaction.

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