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Walgreen Co. Message Board

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  • fastmoney_2011 fastmoney_2011 Aug 16, 2012 12:01 AM Flag

    Moody's downgrades Walgreen's sr unsecured rating to Baa1; outlook negative

    The downgrade follows Walgreen's closing on its purchase of 45% of the equity of Alliance Boots which will weaken its credit metrics. Walgreen's funded debt level will more than double to about $6.0 billion from $2.4 billion currently in order to finance this transaction. This will result in Walgreen's debt to EBITDA increasing to around 4.0 times at August 31, 2012 from 3.3 times for the lagging twelve months ended May 31, 2012. In addition, the downgrade acknowledges the substantial amount of debt at Alliance Boots (about $12.4 billion at March 31, 2012) and Alliance Boots substantial debt maturities in 2014 and 2015. The downgrade also considers that the pharmacy wholesale business of Alliance Boots is outside Walgreen's current retail focus and generates significantly lower margins than retail. The equity investment also exposes Walgreen's to the economic difficulties in Europe. Finally, the downgrade expects that Walgreen will complete the second part of the transaction and will over the longer term ultimately wholly own Alliance Boots.

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