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01 Jul 2009
Approximately $3 billion of debt affected
New York, July 01, 2009 -- Moody's Investors Service affirmed its Baa1 long-term
and Prime-2 short-term ratings of Ingersoll-Rand
Global Holdings Limited (IR Global) and Ingersoll-Rand Company
(IR New Jersey) in connection with a reorganization that has effectively
resulted in the companies' ultimate parent company relocating its
country of incorporation to Ireland from Bermuda. The ultimate
parent is now Ingersoll-Rand plc (Ingersoll), incorporated
in The Republic of Ireland. Moody's is also maintaining its
Baa1 rating on the $300 million of 4.75% notes due
2012, that had been issued by Ingersoll-Rand Company Limited,
but that have been assumed by Ingersoll-Rand International Holding
Limited. Moody's is withdrawing the Prime-2 short-term
rating of Ingersoll-Rand Company Limited because the company has
no commercial paper outstanding under a 4(2) program, and the company
does not anticipate any future issuances. The rating outlook remains
The rating affirmations are based on Moody's conclusion that the
various guarantees put in place as part of the reorganization will help
preserve the same degree of credit and asset protection that holders of
the rated obligations enjoyed prior to the reorganization. The
affirmations also reflect Ingersoll's highly competitive position
in its core markets of heating, ventilation and air conditioning
systems, building security products, food refrigeration systems,
and equipment and tools that improve industrial efficiency. The
rating further recognizes Moody's expectation that despite weakness
in many of Ingersoll's markets, the company's free cash
generation should enable it to continue reducing the debt taken on to
fund the 2008 acquisition of Trane, Inc. Moody's expects
that free cash generation available for debt reduction during 2009 will
exceed $500 million.
The negative outlook reflects Moody's expectation that the downturn
in Ingersoll's key end markets -- particularly US residential
and non-residential construction, refrigerated trucking,
and the commercial refrigeration markets -- will result in free cash
flow being lower than originally expected. This will prolong the
pace at which the company will be able to reduce the remaining $3
billion in debt taken on to fund its purchase of Trane. The downturn
will also result in Ingersoll's credit metrics remaining weak for
the Baa1 rating level until 2010.
Ingersoll maintains a healthy liquidity position within this challenging
operating environment. Following the April placement of $1
billion in long-term debt that was used to repay a maturing bridge
loan, the principal liquidity requirements Ingersoll will face during
the coming twelve months amount to approximately $1.5 billion.
These requirements include commercial paper outstandings, current
maturities of long-term debt, bonds with a put feature,
and outstandings under a receivable sale facility that has a maturity
of less than twelve months. The major liquidity sources available
to cover these requirements total approximately $3.25 billion
and include: a $1.0 billion committed credit facility
maturing in June 2011; a $1.25 billion committed credit
facility maturing in August 2010; $0.5 billion in cash
and marketable securities; and free cash flow (after capital expenditures,
working capital and dividends) exceeding $0.5 billion.
The company's credit facilities contain no material adverse change
language, and the only financial covenant is a maximum debt-to-capital
ratio of 65%, under which it has considerable headroom.
The last rating action on Ingersoll was a change in the Outlook to Negative
on February 12, 2009.
The principal methodology used in rating Ingersoll was the Global Manufacturing
Methodology, which can be found at www.moodys.com
in the Credit Policy & Methodologies directory, in the Ratings
Methodologies subdirectory. Other methodologies and factors that
may have been considered in the process of rating Ingersoll can also be
found in the Credit Policy & Methodologies directory
Ingersoll-Rand plc, headquartered in Ireland, is a
leading producer of heating, ventilation and air conditioning systems,
stationary and transportation refrigeration units, locks,
air compressors and tools, and golf carts.
Michael J. Mulvaney
Corporate Finance Group
Moody's Investors Service
Moody's affirms Ingersoll-Rand ratings
J. Bruce Clark
Senior Vice President
Corporate Finance Group
Moody's Investors Service
No Related Data.
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