Johnson & Johnson is reviewing its bank lines in connection with back-to-back acquisition agreements totaling nearly $2 billion.
In its latest deal, the New Brunswick, N.J., health-care giant said Tuesday that it agreed to buy Eastman Kodak Co.'s clinical diagnostics business for $1 billion in cash.
Just two weeks ago, Johnson & Johnson agreed to buy Neutrogena Corp., a Los Angeles skin-care and beauty-products company, for $924 million in cash.
Jo Ann Heisen, Johnson & Johnson's treasurer, said the two purchases most likely will be financed initially with a combination of internal cash and the issuance of short-term commercial paper. A decision on permanent financing will be made later, but it will probably take the form of medium-term notes and longterm debt.
Ms. Heisen declined to comment specifically on whether or not the company needed to expand its commercial paper backup lines.
"We are currently reviewing our financing plans and bank lines," she said.
Johnson & Johnson has $735 million of committed revolving credit lines, and a "significantly larger" amount of uncommitted lines, Ms. Heisen said. Those lines were provided last December by Chase Manhattan Bank.
Officials at Chase didn't return phone calls by presstime.
Johnson & Johnson's acquisition binge is part of the merger frenzy sweeping a number of industries, including health-care, defense, and media.
The acquisition activity, in turn, has unleashed a torrent of new deal flow in the loan market.
Despite the added leverage from the planned acquisitions by Johnson & Johnson, the company's stellar AAA credit rating was affirmed Tuesday by two major rating agencies.
"The company's recent investments in its consumer and professional segments highlight its commitment to remain a competitive health-care company with a comprehensive, well-balanced portfolio of leading products," Moody's Investors Service.
In affirming the senior-debt rating, Moody's also said it expects that Johnson & Johnson will fund any future significant acquisitions mainly with equity, and that the company will also refrain from repurchasing its own stock.
Kodak, meanwhile, will use the proceeds from the sale of its diagnostics business to further reduce its debt, which stood at $6.3 billion at June 30.
Late last month, Kodak agreed to sell its Sterling Winthrop Inc. unit to SmithKline Beecham PLC for $2.9 billion. Proceeds from that sale also will be used to pay down debt.