Moody's may cut Advanced Medical

Moody's Investors Service said it placed the debt ratings of Advanced Medical Optics Inc. under review for possible downgrade.

This rating action follows the company's announcement that it has agreed to purchase Pfizer's surgical ophthalmology business for about $450 million. Moody's expects the business will be purchased with a combination of debt and equity, but the capital structure has yet to be finalized.

Given this uncertainty, Moody's said it believes that if financed predominantly with debt or debt like securities Advanced Medical's initial credit profile could be materially weaker than expected when Moody's upgraded the ratings in June 2003. At that time Moody's rating incorporated a debt/EBITDA profile of about 3X and the expectation that any acquisitions would be either small or conservatively financed.

In addition, depending on the proposed capital structure, changes in notching of the ratings may also occur.

From a rating prospective, Moody's said the potential for a weaker credit profile may override the strategic benefits of combining these two businesses until the incremental debt is reduced over time.

Ratings affected include the $200 million guaranteed senior subordinated notes due 2010 at B2, the Ba3 senior implied rating and the B1 senior unsecured issuer rating.

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