Carefusion (CFN) Ratings Affirmed at Moody's Following Becton Dickinson (BDX) Deal

Moody's Investors Service Affirmed Carefusion's (NYSE: CFN)) Baa3 senior unsecured rating and maintained the stable outlook following today's announcement by Becton, Dickinson and Company (NYSE: BDX), A3, under review for downgrade) that it plans to acquire CareFusion for approximately $12.2 billion.

Moody's anticipates that CareFusion's existing debt obligations will remain outstanding post transaction. If the transaction closes as currently proposed, Moody's anticipates that it will downgrade Becton's senior unsecured rating by three notches to Baa3, which is at par with CareFusion's current rating.

Should Becton decide not to guarantee CareFusion's debt, or not to provide separate financial statements for CareFusion enabling an independent credit evaluation post acquisition, Moody's will likely withdraw all ratings on CareFusion. For more information, please refer to Moody's rating withdrawal policy on moodys.com.

Outlook Actions:

..Issuer: CareFusion Corporation

....Outlook, Remains Stable

Affirmations:

..Issuer: CareFusion Corporation

....Senior Unsecured Regular Bond/Debenture (Local Currency) Mar 1, 2023, Affirmed Baa3

....Senior Unsecured Regular Bond/Debenture (Local Currency) Aug 1, 2019, Affirmed Baa3

....Senior Unsecured Regular Bond/Debenture (Local Currency) May 15, 2017, Affirmed Baa3

....Senior Unsecured Regular Bond/Debenture (Local Currency) May 15, 2024, Affirmed Baa3

....Senior Unsecured Regular Bond/Debenture (Local Currency) May 15, 2044, Affirmed Baa3

RATINGS RATIONALE

The Baa3 senior unsecured rating reflects CareFusion's strong market presence in US hospitals, supplying medical equipment used in hospital operations and patient care. While the markets are competitive, customer relationships are relatively sticky and cash flow is mostly recurring in nature, both through lease payments, associated consumables (e.g., tubing), replacements and upgrades.

The ratings are constrained by the company's significant earnings concentration in products (dispensing products, infusion pumps and respiratory products) which are sensitive to hospital spending trends and economic cycles. Hospital spending will continue to be under pressure due to reimbursement cuts and weak patient volume trends. Further, some of CareFusion's products are exposed to relatively high regulatory and product recall risk.

The stable outlook reflects Moody's view that following its acquisition by Becton Dickinson, CareFusion will be part of a strong and diverse medical device enterprise at which Moody's will rate. Independent of Becton, CareFusion's Baa3 rating balances the company's solid free cash flow and relatively conservative capital structure with the steady shift of the company's financial policy towards more shareholder friendly activities. Moody's also expects that CareFusion management will balance its pursuit of future acquisitions with the company's commitment to maintain an investment grade rating.

The principal methodology used in this rating was Global Medical Product and Device Industry published in October 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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