OREANDA-NEWS. S&P Global Ratings said today that it has placed its ratings on Aetna Inc. on CreditWatch with developing implications and on Humana Inc. and its core subsidiaries on CreditWatch with negative implications. Our ratings on Humana Health Plans of Puerto Rico Inc., Humana Insurance of Puerto Rico Inc., and Kanawha Insurance Co. are unaffected.

The CreditWatch placements follow the filing by the U. S. Dept. of Justice (DOJ) of a lawsuit opposing Aetna's planned $37 billion acquisition of Humana. Aetna has communicated its intent to vigorously defend its pending transaction.

"We believe that deal termination, despite the incurrence of a $1.0 billion deal break-up fee, would likely have a positive impact on Aetna's financial risk profile given the requirement for significant repayment of debt issued to fund the deal," said S&P Global Ratings credit analyst Joseph Marinucci. "Conversely, we believe that Aetna's intent to litigate could meaningfully extend the timeline to resolution. As a result, financial leverage and associated debt service could be meaningfully worse through the 2017 period. We believe this would likely have a negative credit impact on Aetna's financial profile."

We believe a deal termination would likely have a negative impact on Humana's credit profile because of the removal of benefit associated with being a core component of a larger, more well-diversified enterprise.

"We are placing our ratings on both companies on CreditWatch, given the need to further assess variables," Mr. Marinucci continued.

The CreditWatch Developing placement for Aetna reflects the potential that we could raise our ratings on the company (by one notch) in connection deal termination due to the absence of financing and integration risks associated with the transaction. It also reflects the possibility we could lower our ratings in connection with an extended period of higher leverage and lower debt-service coverage.

The CreditWatch Negative placement for Humana reflects the potential that we could lower on ratings on that company and its core subsidiaries (by one notch) if we no longer view the company as having core status to a newly formed Aetna enterprise stemming from its very meaningful contribution to current and prospective revenue, earnings, cash flow, and capital.

"We will resolve the CreditWatch placements after we evaluate additional details and assess potential responses," Mr. Marinucci added.