Fitch Rates Cardinal Health's $300MM Sr Unsec Notes Offering 'BBB+'

Business Wire,  May 28, 2008  

Tags: Cardinal Health Inc., Fitch

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CHICAGO -- Fitch has assigned a 'BBB+' rating to Cardinal Health's (NYSE: CAH) $300 million senior unsecured notes offering. This is a SEC registered offering. The company intends to use the proceeds from the issuance for general corporate purposes, which may include repayment of indebtedness, working capital, capital expenditures, acquisitions, investments, and repurchases of equity securities.

CAH is facing challenges in the Pharmaceutical Supply Chain Services (PSC) segment of its Healthcare Supply Chain Services sector. Although CAH's other three business segments are performing fairly well, PSC accounts for approximately 50% of operating income. The underperformance of the pharmaceutical segment has been driven by a confluence of factors, including a comparatively tougher environment for its generic business, re-pricing of large contracts, increased monitoring of orders at its DEA-regulated facilities and selected unfavorable pricing in the radiopharmaceutical market. Fitch expects some improvement in the upcoming quarters, as the company has already taken steps to improve performance. Nevertheless, the timing and extent of improvement, in addition to its effect on leverage bear close monitoring. In addition, the company's current leverage leaves little flexibility within the 'BBB+' ratings category.

At Mar. 31, 2008, CAH had approximately $1.5 billion in cash, $3.8 billion of debt ($1.45 billion maturing through 2012) and $1.2 billion availability on its $1.5 billion commercial paper program. For the latest 12 months (LTM) at Mar. 31, 2008, interest coverage (EBITDA/interest) was 19.9 times (x), leverage (total debt/EBITDA) was 1.40x and cash flow from operations was $1.01 billion, which includes a $600 million cash payment to fund the shareholder class action settlement in the quarter ending June 30, 2007.

Fitch's ratings for CAH are as follows:

--Issuer Default Rating (IDR) 'BBB+';

--Senior unsecured credit facility 'BBB+';

--Senior unsecured debt 'BBB+';

--Commercial Paper (CP) 'F2'.

The Rating Outlook is Stable.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

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