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DUFF & PHELPS PLACES BAXTER DEBT ON RATING WATCH; RESTRUCTURING EXPECTED TO HELP OFFSET INDUSTRY PROBLEMS

 CHICAGO, Nov. 16 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has placed its ratings of Baxter International's long-term debt and commercial paper on Rating Watch-Down. D&P currently rates Baxter's senior debt "A" (Single-A), its convertible subordinated debt "BBB+" (Triple-B-Plus), and its commercial paper Duff-1-(Duff-One-Minus). Approximately $2.9 billion of long-term and short-term debt is affected by the rating action.
 The Rating Watch was initiated in response to continuing pressure on prices in the health care industry and the resulting erosion of margins in Baxter's
core hospital supply business. The company's gross margins have declined to 36.5 percent in the first nine months of 1993, vs. 37.9 percent in the corresponding period last year, mainly due to lower prices and an adverse shift in product mix. D&P expects these pressures to continue over the long term as the marketplace seeks ways to control the high growth rate of medical costs and as the Clinton administration advances its health care reform plans.
 Baxter management has responded to the changing health care environment with its announcement today of a sweeping restructuring of the organization. Three layers of senior operating management will be collapsed into a single Office of the Chairman at the corporate level and approximately 4,000 administrative and manufacturing positions will be eliminated in the core hospital supply business. The company's sales force will likewise be realigned from a divisional structure to a team-oriented geographical structure in order to serve accounts more efficiently. Additionally, Baxter's renal, cardiovascular, and biotechnology businesses will be managed together in a new Medical Technology group, and its diagnostics manufacturing business will be divested to raise cash.
 Baxter's restructuring plan, plus additions to product liability reserves, will require a $925 million pre-tax charge against earnings in 1993. D&P's Rating Watch is aimed at monitoring the company's ability to offset margin pressures by cutting overhead and improving efficiency. Maintenance of Baxter's' current debt ratings will depend on the company's progress in both returning to previous levels of overall profitability and in rebuilding balance sheet flexibility following the charges to shareholders' equity.
 -0- 11/16/93
 /CONTACT: Matthew D. Robbins, CFA, of Duff & Phelps Credit Rating Company, 312-368-3120/
 (BAX)


CO: Baxter International ST: IN: MTC SU: RTG

TW -- NY037 -- 4967 11/16/93 10:12 EST
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Date:Nov 16, 1993
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