CVS Health Corp.'s Proposed Senior Unsecured Notes Rated 'BBB'

NEW YORK (S&P Global Ratings) March 26, 2020--S&P Global Ratings today assigned its 'BBB' issue-level rating to pharmacy and health services provider CVS Health Corp.'s proposed senior unsecured notes. We expect the company to use the proceeds from these notes for general corporate purposes, including to repay debt and shore up its balance sheet cash amid the coronavirus pandemic.
We believe CVS Health is better positioned than companies in most other retail subsectors because of the relatively nondiscretionary nature of its services and products. We expect the company' overall operating results to remain solid over the near-term given its role as an essential retailer under government guidelines. Therefore, we believe sales and profit growth in the pharmacy services and retailsegments will remain solid as customers stock up on purchases of essential items, including prescription drugs and household items. However, we anticipate modest, but manageable, cost pressure in the health care segment due to an increase in claims related to the coronavirus.
We continue to expect CVS to repay about $5 billion of debt annually with free cash flow while investing in business initiatives to strengthen its in-store capabilities. We see the proposed issuance as a temporary increase in the company's debt to strengthen its cash reserves amid the uncertainty created by the coronavirus. Therefore, we expect its liquidity to remain strong given its cash balances and revolver capacity.
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