8 Bergen Brunswig Bond Issues Downgraded

For the second time in two months, a leading credit rating agency downgraded debts owed by Bergen Brunswig Corp. to junk bond status, citing concerns about the Orange-based drug wholesaler’s future cash flow.

Standard & Poor’s in New York lowered ratings Wednesday on eight Bergen issues to below investment grade, which could translate into higher borrowing costs.

Bergen, the nation’s third-largest distributor of pharmaceuticals and medical-surgical supplies, has more than $1 billion in long-term obligations.

“The downgrades reflect deteriorating conditions in the company’s core drug distribution business as well as continued losses at Statlander, a specialty drug distributor acquired in 1999,” the agency said in a statement.

Officials at Bergen could not be reached for comment Wednesday.

Bergen’s debt ratings have been under review since June. In December, S&P; and rival Moody’s Investors Services downgraded their ratings on several issues of Bergen debt, rendering certain bonds to the level of high-risk corporate debt known as junk bonds.

S&P; said Bergen may be facing lower earnings and higher interest expenses under its new bank borrowings, putting a squeeze on the company’s cash flow.

The company has been struggling with stiff competition, falling earnings and problems at two companies it acquired last year, specialty drug-distributor Statlander and nursing home pharmacy PharMerica.

Financial results at Statlander have been hampered by increased reserves for bad debt, said Mary Lou Burde, an S&P; analyst. Meanwhile, PharMerica has been struggling like others in the nursing home industry with falling government reimbursements under Medicare.

S&P; initially lowered ratings on some issues last month, citing the poor performance of the acquired companies.

Last week, Bergen officials said they completed a review of money-losing Statlander, conducted by Ernst & Young, and are beginning to restructure the unit to cut costs and boost profits.

Officials also said they were encouraged by improvements in PharMerica’s business, where pricing levels have begun to stabilize.

Bergen’s stock price, which has plummeted 75% over the last year, closed Wednesday at $6.56, up 6 cents in New York Stock Exchange trading.

The Standard & Poor’s announcement was made after the stock market closed.