Fitch Ratings expects to assign a rating of 'A' to the planned $300
million of new seven-year fixed rate senior unsecured notes to be issued
by Cooper US, Inc. The notes will be guaranteed by Cooper Industries,
Ltd. (CBE), the ultimate parent of Cooper US, Inc. and by the principal
U.S. electrical subsidiaries of Cooper US, Inc. Proceeds are expected to
be used to reduce the amount of commercial paper outstanding. The Rating
Outlook is Stable.
The ratings are supported by CBE's established product lines, strong
market positions, solid free cash flow and increased geographic
diversification. CBE's revenue and EBITDA margins continued to improve
in 2007 due to strong demand in the utility and industrial markets, an
increased presence in developing markets and successful new product
introductions. The positive impact on revenue from previous acquisitions
and internal growth could be subject to uncertainty due to U.S. economic
conditions in the current year. Other rating concerns focus on asbestos
liabilities and increased discretionary spending. CBE's asbestos
liabilities have not yet been resolved, but the company's liquidity and
solid operating performance should support its ability to fund a final
settlement. With respect to discretionary spending, acquisitions and
share repurchases can reasonably be expected to continue at a similar
rate as occurred in 2007. The associated negative impact on leverage is
expected to be mitigated by CBE's strong generation of free cash flow
and improving margins.
As of Dec. 31, 2007, CBE's liquidity included $327 million of cash and
investments and a $500 million committed bank facility that matures in
November 2009, offset by $356 million of commercial paper outstanding,
current maturities and short-term debt. Upon issuance of CBE's new
notes, a majority of debt will be structured as long-term.
Fitch currently rates CBE as follows:
Cooper Industries, Ltd.
--Issuer Default Rating (IDR) 'A';
--Senior unsecured bank credit facilities 'A'.
Cooper US, Inc.
--Issuer Default Rating (IDR) 'A';
--Senior unsecured bank credit facilities 'A';
--Senior unsecured debt 'A';
--Short-term IDR 'F1';
--Commercial paper 'F1'.
Cooper Industries LLC
--Issuer Default Rating (IDR) 'A';
--Senior unsecured debt 'A'.
Fitch's rating definitions and the terms of use of such ratings are
available on the agency's public site, www.fitchratings.com.
Published ratings, criteria and methodologies are available from this
site, at all times. Fitch's code of conduct, confidentiality, conflicts
of interest, affiliate firewall, compliance and other relevant policies
and procedures are also available from the 'Code of Conduct' section of
this site.
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