S&P Places Baxalta (BXLT) on Watch for Downgrade

Standard & Poor's Ratings Services placed its ratings on Baxalta Inc. (NYSE: BXLT), including the 'BBB' corporate credit rating and 'A-2' short-term corporate credit rating, on CreditWatch with negative implications pending the close of Shire PLC's planned $32 billion acquisition of the biopharmaceutical company.

The proposed combination of biopharmaceutical companies creates a much larger biopharmaceutical player with a more diverse product portfolio and therapeutic focus. "However, based on the announced terms of the deal, the combined entity would also be much more highly levered than Baxalta on a stand-alone basis, with estimated pro forma leverage of roughly above 4x, from Baxalta's current 2.2x range," said Standard & Poor's credit analyst Arthur Wong. While we believe the combined company can rapidly de-lever, we may lower the ratings on Baxalta and its debt.

We will resolve the CreditWatch placement upon the close of Shire's acquisition of Baxalta, expected by mid-2016.

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