UTC placed on ratings watch by Fitch

Eleanor Steed
By Eleanor Steed September 7, 2017 17:37

UTC placed on ratings watch by Fitch

Fitch Ratings has placed United Technologies Corporation’s (UTC; NYSE: UTX) long-term ratings on Rating Watch Negative following UTC’s announcement of an agreement to acquire Rockwell Collins, Inc. (COL) in a transaction valued at approximately $30 billion.  Separately, Fitch placed COL’s ratings on Rating Watch Positive.

On Sept. 4, 2017, UTC announced an agreement to acquire COL for approximately $30 billion including approximately $7 billion of debt at COL, net of cash on hand. UTC plans to fund the acquisition of COL’s equity, valued at nearly $23 billion, through the issuance of approximately $14 billion of new debt, $1 billion of cash repatriated from overseas, and $7 billion-$8 billion of UTC shares, subject to adjustments. The acquisition is expected to be completed by the third quarter of 2018, subject to approval by COL’s shareholders, regulatory approval, and customary closing conditions.

Fitch expects to resolve the Rating Watch after reviewing details of the transaction and the full impact on UTC’s long-term operating and credit profiles. Fitch could affirm UTC’s ratings if expected benefits from the acquisition are achievable within 2-3 years and UTC follows a disciplined cash deployment strategy that enables it to rebuild its balance sheet. Fitch believes that, if a downgrade of UTC’s rating were to occur, it would be limited to one notch.

Eleanor Steed
By Eleanor Steed September 7, 2017 17:37