S&P Affirms Ratings, Outlook on Stanley Black & Decker (SWK) Amid Move to Acquire Newell Assets
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S&P Global Ratings said today it affirmed its 'A' corporate credit rating and 'A-1' short-term corporate credit rating on Stanley Black & Decker Inc. (NYSE: SWK). The outlook is stable.
"The outlook is stable, reflecting our view that after an initial increase in debt leverage to about 2.5x following the Lenox/Irving acquisition, Stanley will reduce debt leverage to levels consistent with a modest financial risk profile (less than 2x) within 12 months," said S&P Global Ratings credit analyst Thomas Nadramia. "Incorporated in our outlook is our expectation that Stanley will limit share buybacks and other debt-financed actions until such time as debt leverage can be maintained below 2x."
We could take a negative rating action if weaker-than-expected operating conditions, failure to efficiently integrate the new acquisitions, or failure to realize projected synergies results in EBITDA sustained above 2x a year or more after the acquisition closes. We could also take a negative rating action if leverage trends up above 2.5x with little prospect of improvement by 2018.
We view a positive rating action as unlikely in the next 24 months, given our expectation that Stanley will continue to grow through acquisitions over the long term and that it will maintain average leverage in the 1.5x to 2x range over the longer term. However, we could raise the rating if Stanley maintained leverage of below 1.5x and FFO to debt in excess of 60%. In our view, the achievement of these credit measures would require a more-conservative minimal financial risk profile, which we think is unlikely.
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