Moody's Investors Service has tagged a Ba3 rating on the $500 million credit facility for Caremark Rx. The rating agency also upgraded the company's existing credit ratings from B1 to Ba3, pointing to the company's improved cash flow position. In addition, Moody's placed the B2 senior unsecured debt rating and the B2 issuer rating under review for possible upgrade.
Caremark reported net revenues of $4.4 billion and cash flow from continuing operations of $221 million, significantly exceeding the prior year's cash flow. Moody's believes that while some of the improvements in operating cash flow were driven by one-time working capital items, Caremark's 2001 operating cash flow should still approximate 2000 levels. Drivers include strong growth in revenues and net income. Caremark has announced $750 million of new business in 2001, which mitigates concerns regarding the company's position in a competitive, consolidating environment. Moody's notes, that off-setting trends is Caremark's relatively high debt levels and competition from other players that outperform Caremark in covered lives and prescriptions. But, balancing those concerns, Moody's thinks Caremark could successfully pursue acquisitions of smaller players, capitalizing on the consolidation trend.
Caremark's proposed new senior credit facilities comprise a $300 million, four-year revolver and a $200 million, five-year term loan.