MOODY'S CONFIRMS DEBT RATINGS OF HONEYWELL INTERNATIONAL INC. (SR. AT A2).
Moody's Investors Service confirmed the debt ratings of Honeywell International Inc.(Honeywell). The rating action was triggered by the company's announcement that it has signed a definitive agreement to purchase Pittway Corp. for about $2.2 billion in cash, which includes the assumption of Pittway's net debt of about $167 million. The ratings confirmation reflects the potential synergies of the proposed acquisition, which will strengthen Honeywell's position in the growing market for fire and burglar alarms. Furthermore, the rating action incorporates the company's strong balance sheet and its ability to generate strong cash flows which should enable the company to materially reduce the acquisition debt over the next couple of years.
Ratings confirmed are:
Honeywell International Inc.--its A2 senior debt rating; its Prime-1 short-term debt rating; its Prime-1 rating on its extendible commercial notes; and (P)A2 rating on its shelf registration for senior debt.
Honeywell Inc. - A2 rated debentures, medium term notes, IRBs, and issuer rating, (P)A2 shelf rating for senior securities, and Prime-1 short term debt rating.
Honeywell Finance B. V. - (P)A2 shelf rating for senior securities including medium term notes, guaranteed by Honeywell Inc.
Honeywell Canada Limited - (P)A2 shelf rating for senior securities including medium term notes, guaranteed by Honeywell Inc.
Honeywell Holdings Pty. Limited - Prime-1short term debt rating, guaranteed by Honeywell Inc.
Honeywell Europe S.A. - Prime-1short term debt rating, guaranteed by Honeywell Inc.
Honeywell Holding AG - Prime-1short term debt rating, guaranteed by Honeywell Inc.
Honeywell Finance Public Limited Company - Prime-1 short term debt rating, guaranteed by Honeywell Inc.
Allied Corporation--the A2 rating on guaranteed senior debt.
Moody's confirmation focused on the operating synergies of the planned acquisition and concluded that Pittway will significantly strengthen Honeywell's position in sensors, systems integration and HVAC controls which are primarily used in the fast growing fire and security markets.
Furthermore, while Honeywell's currently strong balance sheet will weaken somewhat as a result of this acquisition, Moody's believes that the combined entity's profit and cash flow potential is significant. Such cash flow generation will enable the company to significantly reduce the acquisition debt and strengthen again its balance sheet by year end 2000.
The rating agency, however, cautioned that Honeywell faces a challenging task to successfully integrate the two just merged major companies--AlliedSignal and Honeywell-- and to assimilate Pittway. Moreover, Honeywell is acquisitive and more acquisitions are expected. Thus, Moody's said, additional large debt-funded acquisitions and/or difficulties in the company's overall integration process could undermine the stability of the ratings.
Honeywell International Inc., headquartered in Morristown, New Jersey, is a diversified company serving primarily the aerospace, home and building, automotive, chemicals, fibers, plastics, and advanced materials markets.
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