UPDATE 4-Newell cuts dividend again, to offer notes

Tue Mar 24, 2009 2:53pm EDT

Related Topics

* Slashes dividend for second time in two months

* To sell $250 mln in notes, replace other financing

* Company affirms 1st-qtr profit forecast, sales light

* Shares fall 9 percent (Adds company comments)

By Brad Dorfman

CHICAGO, March 24 (Reuters) - Newell Rubbermaid Inc (NWL.N) plans to slash its dividend in half for the second time in two months as it tries to maintain an investment-grade rating while taking steps to repay debt coming due later this year.

The maker of Sharpie pens and Rubbermaid containers also said on Tuesday that first-quarter sales would fall in the mid to high teens on a percentage basis, a worse outlook than the low-to-mid-teen decline the company forecast in late January.

Newell shares fell 9 percent.

Analysts had mixed views. On the one hand, several said it was positive that the company was showing how it would refinance at least some of the debt it has due this year.

"We're encouraged to see that they are making efforts to repay at least a portion of the debt that matures this year," Morningstar analyst Erin Swanson said.

Still, Swanson and other analysts said the company still has not specifically addressed how it will repay the rest of the debt that comes due this year.

"While Newell appears to have taken a step forward in shoring up its liquidity situation, the lack of details give us pause," Oppenheimer analyst Joseph Altobello said in a research note.

As consumers curb their spending on discretionary items, retailers are stocking lower-priced products and some competitors are cutting prices, Newell said when it announced earnings in January.

At that time, CEO Mark Ketchum said the company's top priority was to protect cash and earnings.

The company affirmed its first-quarter earnings forecast of 7 cents to 12 cents a share before one-time items, citing expense controls and lower costs for materials. Analysts on average expect a profit of 9 cents a share, according to Reuters Estimates.

DIVIDEND SLASHED

Newell reduced its quarterly dividend to 5 cents per share from 10.5 cents. The cut comes after the company slashed the payout in half to 10.5 cents on Jan. 29 in a bid to protect its credit rating and maintain access to the credit markets.

Analysts were not sure that would be the last time the company would cut its dividend as sales fall and it has more debt to refinance.

"The pressures that Newell is facing are still there and capital is tight, obviously, so I wouldn't rule anything out," Swanson said.

When asked about future dividend cuts, a Newell spokesman said the day's actions have taken care of much of the debt it has coming due this year.

"We believe that we have taken the steps needed to protect our investment grade credit rating and position the company to weather the economic storm," spokesman David Doolittle, said.

Newell said it would offer $250 million in convertible notes.

The company has retained Banc of America Securities LLC and J.P. Morgan Securities Inc to arrange a replacement of its 364-day trade receivables financing with a maximum amount of $250 million. That replacement is to come when the company's existing $450 million receivables facility expires, Newell said.

Newell is making the financing moves to repay a portion of the roughly $750 million in debt coming due in the second half of the year. The rest of the debt will be addressed through the capital markets or through other arrangements, the company said.

In connection with the convertible notes offering, Newell also plans to enter into hedging transactions to reduce the potential dilution to its shares.

Newell shares were down 58 cents at $6.67 in afternoon trading, after falling to $6.36, on the New York Stock Exchange. (Additional reporting by Martinne Geller; Editing by Gunna Dickson and Maureen Bavdek)

FILED UNDER: