Thermo Fisher Designed a Capital Structure for Financing the Deal

Essay

Thermo Fisher designed a capital structure for financing the deal that would retain its investment grade credit rating. To do so, it targeted a debt to total capital and interest coverage ratio consistent with the industry average for these credit ratios. What is the potential impact on Thermo Fisher's ability to retain an investment grade credit rating if it had financed the takeover using 100% senior debt? (Hint: In the Sources and Uses section of the Transaction Summary Worksheet, set excess cash, new common shares issued, and convertible preferred shares to zero. Senior debt will automatically increase to 100% of the equity consideration plus transaction expenses.) Explain your answer.