April 7 (Bloomberg) -- Novartis AG lost its AAA rating at Moody's Investors Service and Standard & Poor's, shrinking the ranks of the world's top-rated industrial companies at both services to six.

Novartis, Switzerland's largest drugmaker, is the third company to lose its AAA credit rating since August, following United Parcel Service Inc. and Nestle SA. Novartis had its long- term corporate rating lowered three levels to AA- by S&P because it plans to finance the purchase of a stake in Alcon Inc. with debt. Moody's cut Basel-based Novartis to Aa2.

The number of borrowers with top rankings has dwindled as companies sacrifice ratings for higher share prices. Automatic Data Processing Inc., Berkshire Hathaway Inc., Exxon Mobil Corp., General Electric Co., Johnson & Johnson and Toyota Motor Corp. are the six remaining borrowers with top S&P and Moody's ratings. In 1981, S&P ranked 30 U.S. non-financial issuers AAA.

``Today shareholders have a much louder voice than they used to,'' said Nicholas Riccio, a managing director and corporate credit analyst at S&P in New York. ``It puts a lot more pressure on people to keep the shareholders happy.''

UPS and Nestle both lost their rankings after announcing stock repurchases.

Novartis agreed today to buy a 25 percent stake in Hunenberg, Switzerland-based Alcon for $11 billion and may acquire another 52 percent for $28 billion to become the world's biggest maker of eye-care products. Novartis offered $143.18 for each Alcon share with an option to increase the holding to 77 percent at a higher price, the companies said today.

`Lack of Commitment'

``Novartis's lack of commitment to the former AAA rating is demonstrated'' by the use of debt to fund the Alcon purchase, S&P credit analyst Olaf Toelke said in the statement. ``This action is a marked deviation from the group's former conservative financial policy.''

Investors demand an additional 78 basis points to own debt rated AA on average rather than AAA ranked securities, compared with a gap of 9 basis points a year ago, according to Merrill Lynch & Co. index data.

Novartis, which generated $38 billion in sales last year, had $5.79 billion in borrowings as of December, according to data compiled by Bloomberg. The company has been ranked AAA by S&P since April 1997, four months after it was formed with the merger of Ciba-Geigy AG and Sandoz AG.

Fairfield, Connecticut-based GE, the biggest U.S. corporate borrower, has been AAA at S&P since at least 1974, Exxon Mobil, the Irving, Texas-based oil company, has been AAA at S&P since at least 1985 and Warren Buffett's Berkshire Hathaway has held its rating since 1989, Bloomberg data show.

UPS, Nestle

UPS, the largest deliverer of packages, lost its top rating from S&P after the Atlanta-based company boosted its stock- buyback to $10 billion. Moody's cut UPS a month earlier because of debt it took on to pay for costs to leave a Teamsters' pension fund and weakening demand for freight shipments.

Nestle, the world's largest food company, was stripped of its AAA by S&P and Moody's after it announced plans to repurchase 25 billion Swiss francs ($24.7 billion) of stock, its biggest-ever share buyback.

To contact the reporter on this story: Bryan Keogh in New York at bkeogh4@bloomberg.net

Last Updated: April 7, 2008 18:33 EDT