Fitch Rates Life Technologies' New Unsecured Notes 'BBB-'; Outlook Stable

CHICAGO--(BUSINESS WIRE)--Fitch Ratings has assigned a 'BBB-' rating to Life Technology Corp.'s (Life Technologies) proposed $1.5 billion new unsecured notes comprising three-, five- and 10-year tranches. In addition, Fitch has affirmed Life Technologies' ratings as follows:

--Issuer Default Rating (IDR) at 'BBB-';

--Senior convertible notes at 'BBB-';

--Senior secured credit facilities at 'BBB-'.

The Rating Outlook is Stable. Total rated debt at Sept. 30, 2009, was approximately $3.2 billion.

Fitch expects the net proceeds from the new debt issuances to be used to repay outstanding borrowings under the company's term loans. Fitch recognizes the company's declining debt and leverage levels as well as significant progress in integrating the Applied Biosystems, Inc. (ABI) acquisition and stable operating performance. Leverage (total debt to EBITDA) at Sept. 30, 2009 was 3.2 times (x), a decline from the end of 2008 when leverage was 6.9x. Since the end of 2008, Life Technologies has completed debt reduction totaling $425 million, including a $150 million prepayment on the Term Loan B facility during the fourth quarter of 2009. In the near-term, Fitch expects leverage to continue to decline as the ABI acquisition annualizes and as the company applies the expected $290 million in net proceeds from the divestiture of its Mass Spectrometry joint venture to reduce outstanding debt. Longer-term, Fitch expects leverage to remain below 2.5x, with periodic increases possible to fund strategic investments.

Fitch's affirmation of Life Technologies' ratings reflects the successful execution of the ABI integration to date. Currently, the company's integration efforts are proceeding ahead of schedule having achieved an increased synergy target of $95 million in 2009 and expectations of deriving another $70 million in 2010. Fitch believes that significant synergy potential remains, as the company reduces infrastructure and leverages its market position, technology, supply chain, and broad product offering to capture revenue synergies. However, Fitch notes that integration risks remain, especially as the company increases its focus on revenue synergies.

Life Technologies has maintained strong operating performance in 2009 while facing a weak economy and integrating the ABI acquisition. During 2009, Life Technologies reported 7% organic revenue growth (with H1N1 providing 1.5% revenue growth) while adjusted operating margins expanded as a result of synergy realization and cost management. Fitch believes that Life Technologies' operating results reflect the relative resilience of its industry and market position, in particular its focus on life sciences research markets, high-end technologies, and growing market segments. It should be noted that there has been some softness in sales to biotechnology and pharmaceutical customers as well as declines in royalty revenues. Longer-term, Fitch sees support for sustained operating performance from the company's focus on expanding its presence in leading-edge applications and emerging markets, such as stem cells, next-generation sequencing, applied markets, and more. Near-term, Fitch notes increased stimulus funding for the National Institutes of Health (NIH) will provide incremental revenue opportunity in 2010.

Life Technologies has also maintained stable cash flows and liquidity. Liquidity is provided by availability on the company's $250 million senior secured revolver due Nov. 21, 2013 ($237 million available at Sept. 30, 2009) and cash on hand ($519 million at Sept. 30, 2009). Free cash flow (FCF) for the latest 12 months (LTM) ended Sept. 30, 2009, was approximately $450 million, corresponding to a 15.2% FCF margin. Management noted free cash flow of $534 million for full year 2009, representing a 16.3% margin. Going forward, Fitch expects FCF to expand due to increased earnings and synergies.

These rating actions reflect the application of Fitch's current criteria which is available on Fitch's web site at 'www.fitchratings.com' and specifically include:

--'Corporate Rating Methodology', dated Nov. 24, 2009.

--'Liquidity Considerations for Corporate Issuers' dated June 12, 2007.

Additional information is available at 'www.fitchratings.com'.

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