Standard & Poor's Ratings Services today said its ratings, including the 'AA-' corporate credit rating, on Medtronic Inc. (NYSE: MDT) remain on CreditWatch with negative implications, pending the planned acquisition of Covidien plc.

"The proposed transaction strengthens Medtronic's scale, product diversity, and market position, and could represent an additional competitive advantage for the company, offset by a considerable increase in financial risk," said credit analyst David Kaplan. "We estimate Medtronic's reduced cash combined with the debt being assumed from Covidien, and the additional debt to be issued would increase Medtronic's pro forma adjusted net leverage to about 2x to 2.2x at close from about 0.7x."

We will resolve the CreditWatch placement when we have more details on the financials, and the degree to which the company may be committed to maintaining leverage below 2x, especially in the face of other competing strategic priorities.