Moody's Upgrades Boston Scientific's (BSX) Unsecured Rating to 'Baa2'; Outlook Stable

Moody's Investors Service upgraded Boston Scientific Corporation's (NYSE: BSX) senior unsecured rating to Baa2 from Baa3. This action is based on Moody's expectation that Boston Scientific's improved operating performance will support further deleveraging. It also reflects Moody's view that the company has made progress in resolving its outstanding litigation and is committed to financial policies that will support a higher rating. The rating outlook is stable.

Ratings upgraded:

Boston Scientific Corporation:

Senior unsecured notes to Baa2 from Baa3

"The upgrade reflects our view that Boston Scientific's solid product pipeline and ongoing deleveraging has contributed to a stronger credit profile," said Diana Lee, a Moody's Vice President and Senior Credit Officer. "We also believe that progress made in the litigation arena reduces uncertainty," added Lee. Moody's believes that because of litigation payouts, Boston Scientific will moderate its spending on acquisitions and share buybacks over the next few years.

RATINGS RATIONALE

Boston Scientific's Baa2 rating reflects the company's good revenue base, segment diversity and moderate leverage. These strengths are partially offset by relatively high concentration in low growth product categories. Interventional cardiology (IC) and cardiac rhythm management (CRM) products -- over half of the company's sales -- will face sector-wide challenges because of pricing and volume constraints. Over the coming year, the company will benefit from new products in these and other segments. A prudent acquisition strategy and shareholder posture will contribute to moderate leverage. Although the company has made progress in reaching litigation settlements, there remains uncertainty in this area.

The stable outlook reflects Moody's expectation that Boston Scientific will sustain sales trends that are at least in line with market growth rates. The outlook also reflects Moody's view that Boston Scientific will sustain moderate leverage even as it pursues acquisitions and makes payouts related to litigation and tax settlements. lf Boston Scientific achieves solid sales growth, stronger margins, and higher free cash flow, the ratings could be upgraded. The company would also need to maintain a prudent financial policy. Moody's would also need to believe that debt/EBITDA will be sustained below 2.25 times before the rating agency would consider an upgrade. If Boston Scientific engages in debt-financed M&A or shareholder initiatives, or if it is required to make higher than anticipated litigation payouts, the ratings could be downgraded. Additionally, if Moody's believes that debt/EBITDA will be sustained above 2.75 times, the ratings could be downgraded.

The principal methodology used in these ratings was that for the Global Medical Product and Device Industry published in October 2012. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

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