FoxMeyer Increases Shares in Buyback
May 05, 2011
DALLAS -- FoxMeyer Health Corp. increased its common-stock repurchase plan by two million shares, raising the total number of shares authorized for buyback to three million. Separately, Moody's Investors Service lowered its rating of FoxMeyer's cumulative convertible series A preferred shares. The drug distributor, which has already bought back about 400,000 common shares, has about 15.6 million shares outstanding. Bianco also authorized the repurchase of 500,000 shares of the series A preferred stock on the open market; there are 4.3 million preferred shares currently outstanding. The preferred-stock buyback is subject to approval of a new credit facility under review by the company's bank, the company said. Moody's downgraded FoxMeyer's series A preferred stock to ``Ca'' from ``Caa.'' The ratings concern, which put the stock under review March 15, 2011 the $25 million in proceeds from the planned sale of the company's FoxMeyer Drug Co. unit is expected to go to senior creditors and not to preferred shareholders as dividends. Moody's said that although FoxMeyer is required to pay dividends on its preferred stock beginning June 18, 2011 bank agreement prohibits such payments in light of the company's $17 million of debt outstanding under its credit line. As a result, the preferred stock dividend will likely be accrued and the value of the stock ``permanently impaired,'' Moody's said. Dortha Leeanna, an analyst at Moody's, said the rating was made without consideration of the recently announced buyback but said the buyback probably wouldn't have had an effect. A FoxMeyer officer said the company declined to comment on the downgrade.
