Boston Scientific Corporation — Moody’s upgrades Boston Scientific to Baa1, outlook stable

Rating Action: Moody’s upgrades Boston Scientific to Baa1, outlook stableGlobal Credit Research – 23 Feb 2022New York, February 23, 2022 — Moody’s Investors Service (“Moody’s”) upgraded Boston Scientific Corporation’s (“Boston Scientific”) senior unsecured rating to Baa1 from Baa2. Moody’s also affirmed the company’s Prime-2 commercial paper rating. The outlook remains stable.The upgrade reflects the company’s successful navigation through the coronavirus pandemic and Moody’s expectations that it will return to consistent mid to high single digit revenue growth. Moody’s also expects Boston Scientific’s operating margins will continue to rise over time. While there may be some near-term volatility, depending on the trajectory of the pandemic and potential impacts from various supply chain challenges facing all medical device companies, Moody’s believes the company is well positioned to manage through these challenges. The company benefits from a highly diversified business model as it is not reliant on any single product or franchise for growth. In addition, Boston Scientific has a good track record of identifying and integrating acquisitions that are accretive over time to its growth profile.Governance considerations are material to the rating action. The company has demonstrated a commitment to balanced financial policies notably in the issuance of approximately $2 billion of equity in mid-2020 at the height of the pandemic. A portion of these proceeds were used to reduce debt and to provide the company with incremental liquidity. The company also has a clearly articulated leverage target of debt/EBITDA of 2.25-2.5 times (approximately 2.5-2.75 on a Moody’s adjusted basis). Moody’s expects the company will remain acquisitive but at a pace consistent with its history with a focus on tuck-in transactions as opposed to larger transformative transactions.Upgrades:..Issuer: Boston Scientific Corporation….Senior Unsecured Regular Bond/Debenture, Upgraded to Baa1 from Baa2Affirmations:..Issuer: Boston Scientific Corporation….Senior Unsecured Commercial Paper, Affirmed P-2Outlook Actions:..Issuer: Boston Scientific Corporation….Outlook, Remains StableRATING RATIONALEBoston Scientific’s credit profile reflects its significant scale in the medical device industry with nearly $12 billion of revenues. The company benefits from significant diversification across multiple product categories. Within all its franchises, the company has multiple products and is generally amongst the leaders in each segment. The company also has a solid long term track record (aside from the impact of the coronavirus pandemic) of mid to high single digit organic revenue growth. The company also has maintained consistently high and rising operating profit margins and Moody’s expects the company will return to pre-pandemic margins over the next year. The company also has a clearly articulated leverage target of debt/EBITDA of 2.25-2.5x (approximately 2.5-2.75x on a Moody’s adjusted basis). Leverage is currently in the high 2x range reflecting the lingering impacts of the coronavirus pandemic on earnings and Moody’s expects the company will reach its target range in the next 12 to 18 months.Boston Scientific’s ratings are somewhat constrained by its appetite for M&A, though most transactions have been tuck-in in nature. The company has a still significant, though declining, reliance on mature categories such as pacemakers and stents.ESG considerations are a factor in Boston Scientific’s credit ratings. Social risks are negative and arise from risks associated with responsible production. As a manufacturer of medical devices that are inserted into the body, such as pacemakers and stents, the company can have exposure to risks such as product recalls, regulatory actions, or product liability litigation. Boston Scientific has incurred legal costs, including mesh litigation costs, exceeding $2 billion over the past five years. These have been largely resolved but highlight the potential risk for product liability in this sector. With respect to governance, the company has articulated a clear leverage target and has shown the willingness to raise equity, most recently in mid 2020 at the height of the coronavirus pandemic, to improve liquidity.The outlook is stable. Moody’s expects Boston Scientific to maintain above-average growth rates over time. Moody’s expects Boston Scientific will prioritize the use of free cash flow for acquisitions while maintain leverage at levels consistent with its stated targets. If any acquisitions resulted in higher leverage, Moody’s expects the company would rapidly de-lever given its strong free cash flow profile.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSRatings could be upgraded if the company continues to demonstrate a solid growth profile while maintaining low financial leverage. Further diversification by product would be positive as well. Quantitatively ratings could be upgraded if debt/EBITDA was sustained below 2.25 times.Ratings could be downgraded if the company’s financial policies became more aggressive or if it were to experience operating setbacks across a range of product categories. Quantitatively ratings could be downgraded if debt/EBITDA was sustained above 2.75 times.Boston Scientific Corporation is a leading global medical device manufacturer headquartered in Marlborough, Massachusetts. The company specializes in devices used in a broad range of interventional medical specialties including cardiovascular, cardiac rhythm management (including neuromodulation), and medical surgical. The company generates nearly $12 billion in annual revenue.The principal methodology used in these ratings was Medical Products and Devices published in October 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1278812. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. 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Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Scott Tuhy Senior Vice President Corporate Finance Group Moody’s Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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