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Pfizer gambles with big selloff

– Pfizer Inc., the world’s biggest drugmaker, is jeopardizing its credit rating as it considers selling units that account for about 27 percent of its $67.8 billion in annual sales and using proceeds for share buybacks.

The cost to protect Pfizer debt from default rose the most this year among 13 U.S. pharmaceuticals companies from Merck to Eli Lilly, according to data provider CMA.

CEO Ian Read’s potential divestitures may make New York-based Pfizer too reliant on risky experimental drugs and may lead to a downgrade, said Michael Levesque, an analyst at Moody’s Investors Service.

“We want to put a caution out there to bondholders,” said Levesque, who has a grade of A1 on Pfizer’s debt. If Pfizer sells units, “the business becomes smaller and less diverse, and if those proceeds are just returned to shareholders, then that is a negative credit risk,” he said.

Pfizer, which lost its top AAA debt ratings from Moody’s in 2006 and Standard & Poor’s in 2009, is closing plants and selling businesses to prepare for the expiration of its exclusive right to make Lipitor cholesterol pills, the world’s best-selling drug. Read agreed in April to sell the Capsugel manufacturing business, Pfizer’s smallest unit, to KKR & Co. for $2.38 billion.

A cut to A2 would leave Pfizer with a lower debt grade than Merck, ranked A1 by Moody’s and AA by S&P.

It would match Bristol-Myers Squibb’s and Eli Lilly’s ratings, according to data compiled by Bloomberg.

Credit-default swaps on Pfizer have climbed 8 basis points this year to 60 basis points through Tuesday, while derivatives protecting Merck debt from default fell 8 basis points to 20 basis points, according to New York-based CMA.