US CREDIT SUPPLY: Baxter: 3YR, 5YR, 10YR New Issue
Nov-19 14:40
BAX (Baa3/BBB-/NR)
#MNI #Healthcare
- MNI FV: 3YR +105 area, 5YR +120 area, 10YR +140 area
- IPT: 3YR +130 area, 5YR +155 area, 10YR +185 area
- Baxter is issuing bonds to help fund a tender offer for front-end bonds with a cap of $1.05bn as well as to refinance term loan borrowings and for GCP. BAX was recently downgraded by both S&P and Moody's to BBB-/Baa3 and both have Stable Outlooks. The downgrades were a result of weak earnings in 2025 as well as management's comments that de-leveraging has been delayed to the end of FY26. Management is still targeting net leverage of 3.0x by year-end '26 but this has been delayed from their original plan of FYE25. Leverage remains high with Moody's calculating gross leverage of 5.2x as of 3Q25.
- We believe Baxter will remain IG-rated as they have cut their dividend (~$300mm savings) and have committed to de-leveraging in FY26. Moody's expects BAX to de-leverage to approximately 4.0x gross by year-end '26. Moody's downgrade trigger is sustained leverage above 4.0x so we think BAX will eventually get below that figure in FY27 which should keep the low-IG ratings. Given the challenging earnings and de-leveraging profile, we think BAX should trade wide of other MedTech comps such as SOLV, ZBH and BDX. We've also included TEVA bonds in our chart to show where high-BB Healthcare trades as a reference point (noting we don't expect BAX to fall to HY and we do believe TEVA will return to IG ratings in next 12-18 months).
- Please see our recent write-ups on BAX's rating changes and 3Q25 earnings results here:
- https://www.mnimarkets.com/articles/baxter-moodys-downgrades-bax-to-baa3stable-1763052967815
- https://www.mnimarkets.com/articles/baxter-sandp-downgrades-bax-to-bbb-1762525823974
- https://www.mnimarkets.com/articles/baxter-3q25-earnings-1761837102134
- Format: SEC Registered, Senior Unsecured
- Bookrunners: Active: BofA, Citi, JPM
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