Bayer Long-Term Ratings Cut to AA- After Drug Withdrawal and Acquisition Talks; Still on Watch.

Business Editors

LONDON--(BUSINESS WIRE)--Standard & Poor's

Sept. 26, 2001-- Standard & Poor's today lowered its long-term ratings on the German pharmaceuticals and chemicals group Bayer AG (Bayer) and related entities to double-'A'-minus from double-'A'.

All ratings remain on CreditWatch, where they were placed with negative implications on July 10, 2001. (See list below for all ratings affected.)

The ratings reflect Standard & Poor's belief that, following the withdrawal of a high profile drug, and a planned major debt-financed acquisition, Bayer's financial profile will be incompatible with a double-'A' rating. Initially, the group has funds from operations to total debt of less than 50%, and EBITDA to interest coverage of less than 10 times on a pro forma basis.

Last month, Bayer withdrew its high-growth cholesterol-lowering agent Baycol/Lipobay due to reports on side effects involving muscular weakness. The drug had a sales potential of about 1 billion (pounds sterling) ($921 million) following 636 million (pounds sterling) sales last year. As a consequence, Bayer's earnings in 2001 will fall substantially short of previous estimates, further compounded by the continued weakness in the group's industrial businesses as a result of the global economic downturn.

The withdrawal of a major drug has put further pressure on the group's financial profile, which had already been affected by the group's exclusive negotiations with Aventis S.A. (A/Positive/A-1) and Schering AG (not rated) on the sale of Aventis CropScience. Standard & Poor's estimates the transaction value to be in the region of 6 billion - 8 billion (pounds sterling).

While the transaction, if successfully concluded, would reinforce Bayer's strongest business area, this would be overcompensated by the adverse impact on Bayer's financial position, with financial ratios more reflective of a single-'A' category rating. Ultimately, ratings will depend on the diverse group's willingness to restore its financial profile via divestitures, its management of working capital and capital expenditures, its future financial policies, the likelihood and size of any product liability relating to Baycol, and whether the purchase of Aventis CropScience is successfully concluded.

RATINGS LOWERED AND REMAINING ON CREDITWATCH WITH NEGATIVE
IMPLICATIONS

                                          To                From
Bayer AG
  Long-term corporate credit rating       AA-               AA
  Senior unsecured debt.                  AA-               AA

Bayer Capital Corp.
  Senior unsecured debt(a)                  AA-               AA

Bayer Ltd. of Tokyo
  Senior unsecured debt(a)                  AA-               AA

Bayer Corp.
  Long-term corporate credit rating       AA-               AA
  Senior unsecured debt                   AA-               AA

RATINGS REMAINING ON CREDITWATCH WITH NEGATIVE IMPLICATIONS

                                            Rating
Bayer AG
  Short-term corporate credit rating        A-1+

  Commercial paper                          A-1+

Bayer Corp.
  Short-term corporate credit rating        A-1+
  Commercial paper                          A-1+


    (a) Guaranteed by Bayer AG.

      Supported by Bayer AG.