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PLEASE READ AND SCROLL DOWN!

 

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Rating Action:

MOODY'S REVIEWS TYCO'S LONG-TERM DEBT RATINGS FOR UPGRADE (Sr. AT Baa1); REVIEWS CIT GROUP'S LONG-TERM DEBT RATINGS FOR DOWNGRADE (Sr. AT A1); SHORT-TERM DEBT RATINGS FOR BOTH COMPANIES CONFIRMED

13 Mar 2001
MOODY'S REVIEWS TYCO'S LONG-TERM DEBT RATINGS FOR UPGRADE (Sr. AT Baa1); REVIEWS CIT GROUP'S LONG-TERM DEBT RATINGS FOR DOWNGRADE (Sr. AT A1); SHORT-TERM DEBT RATINGS FOR BOTH COMPANIES CONFIRMED

Approximately $53 Billion of Debt Securities Affected.

New York, March 13, 2001 -- Moody's Investors Service placed the long-term debt ratings of Tyco International Ltd. (Tyco) under review for possible upgrade following its announced pending acquisition of CIT Group, Inc. At the same time CIT Group's long-term debt ratings were placed under review for possible downgrade. Both Tyco's and CIT Group's short-term debt ratings are not under review and are confirmed.

The transaction will be structured as a tax-free stock-for-stock transaction valued at $9.2 billion. In lieu of receiving stock, Tyco has entered into an agreement with Dai-Ichi Kango Bank, Limited for the purchase of the bank's 71 million shares at $35.02 per share in cash for an aggregate cost of approximately $2.5 billion in cash. Initially, this will be funded in the commercial paper market.

The rating agency said its review of Tyco will focus on the diversification of its business mix resulting from this transaction and incremental cash flow development. The use of equity is viewed favorably the rating agency said The review will also focus on cash flow generation from Tyco's current businesses, given the recent weakness in some of its end markets. Moody's said that Tyco's financial philosophy going forward, its capital structure, and management of CIT as a separate profit center and funding source will be explored. In addition, capital flows from Tyco to CIT Group and further portfolio acquisitions using the CIT Group platform will be assessed. Lastly, financial strategies, integration risks, cost synergies and management challenges represented by this acquisition in Tyco's business mix will be explored.

In its review of the CIT Group, Moody's said it will particularly consider CIT Group's financial and operating risk governance under the Tyco corporate umbrella in its further discussions with management. CIT Group's equity returns and earnings growth profile are dissimilar to those of Tyco, and Moody's will assess what changes may be made within CIT Group in an effort for it to more closely resemble its new parent company. Additionally, the rating agency noted that CIT Group will be owned by an entity whose debt will be rated lower than its own, and Moody's will examine the risks related to this structure. Finally, Moody's said that it will review CIT Group's expected portfolio composition.

-- Ratings under review for upgrade are:

Tyco International Ltd. -- Baa1 for convertible debentures, (P)Baa1 for senior debt securities and (P)Baa2 for subordinated debt securities, and (P)"baa2" for preferred stock issued under its 415 shelf registration; and Baa1 for Liquid Yield Option Notes.

Tyco International Group S.A. -- Baa1 for senior notes and debentures, guaranteed by Tyco; (P)Baa1 for senior debt securities issued under its 415 shelf registration guaranteed by Tyco; Baa1 for bank revolving credit facilities, guaranteed by Tyco.

Tyco International (US) Inc. -- A3 for senior unsecured notes and debentures.

ADT Operations, Inc. -- Baa1 for senior subordinated notes; and Baa1 for subordinated Liquid Yield Option Notes.

Raychem Corporation -- Baa2 for the $400 million senior, unsecured notes.

Mallinckrodt Inc. -- Baa2 for senior unsecured notes and debentures, and industrial revenue bonds.

-- Ratings under review for downgrade are:

The CIT Group, Inc. -- A1 for senior debt securities; A1 long-term issuer rating; A2 for subordinated and A2 for junior subordinated securities; (P)A1 for senior debt securities and (P)A2 for subordinated debt securities issued under its 415 shelf registration.

CIT Capital Trust I -- "a1" rating for preferred stock guaranteed by The CIT Group, Inc.

Newcourt Credit Group Inc. -- A1 for senior unsecured securities guaranteed by The CIT Group, Inc.

AT&T Capital Corporation -- A1 for senior debt securities guaranteed by The CIT Group, Inc.

-- Ratings confirmed are:

Tyco International Group, S.A. -- Prime-2 short-term debt rating

The CIT Group, Inc. -- Prime-1 short-term debt rating.

The CIT Group, Inc., headquartered in Livingston, New Jersey, is the largest publicly owned commercial finance company in the United States, with approximately $50 billion in assets under management.

Tyco International Ltd., headquartered in Hamilton, Bermuda, is a diversified global manufacturing and service company of industrial and commercial products serving the fire protection, electronic security service, disposable medical products, packaging materials, flow control, electrical and electronic components, and underwater telecommunication markets.

New York
Robert Young
Senior Vice President
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653

New York
George A. Meyers
VP - Senior Credit Officer
Corporate Finance
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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