S&P affirms CVS Caremark

Standard & Poor's said it affirmed CVS Caremark Corp's BBB+ corporate credit rating following its bid to acquire Longs Drug Stores for $2.9 billion, including the assumption of net debt.

The acquisition will be funded by a $1.5 billion bridge loan facility, together with borrowings under a commercial paper program and cash.

The outlook is stable.

S&P said the affirmation is based on CVS Caremark's track record in integrating acquired retail stores, its strong cash flow generation and the expected debt reduction to restore credit measures to levels more appropriate for the rating.

Pro forma total debt-to-EBITDA ratio is about 3.2 times for the 12 months ended June 30, from 2.8 times, but the agency said it expects leverage to fall to below 3 times at year-end 2008.

Ratings reflect a solid position in the favorably regarded drugstore industry, leading position as a pharmacy benefit manager, diverse cash flow stream and generally good operating performance, the agency said.

These strengths are partially offset by the company's participation in the highly competitive retail pharmacy industry, its more aggressive financial policy and the uncertain impact of ongoing civil and governmental investigations into the practices of pharmacy benefit managers, S&P noted.

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