TEXT-S&P: DuPont ratings unchanged on coating business sale
Aug 30 - Standard & Poor's Ratings Services said today that its ratings on E.I. DuPont de Nemours & Co. (A/Stable/A-1) remain unchanged following DuPont's announcement that it has reached an agreement to sell its performance coatings business to the Carlyle Group for approximately $4.9 billion in cash. DuPont intends to use net after-tax proceeds from the transaction, which it expects to close by the first quarter of 2013, primarily to strengthen its balance sheet. DuPont's credit measures are currently subpar for the ratings following its May 2011 acquisition of food ingredient and enzyme producer Danisco A/S for about $7 billion. As of June 30, 2012, funds from operations-to-net adjusted debt was 24%, well below our expectation of 35% to 40% at the current ratings. Notwithstanding the near-term impact of a tepid global economy, we expect DuPont's credit measures to strengthen to levels commensurate with the ratings during the next two years, in part as a result of the expected net debt reduction with the proceeds of this sale. We also expect earnings and cash flow to improve as a result of favorable conditions in certain key end markets, such as agriculture and automotive and a continued brisk pace of new product introductions. We view the sale of the coatings business as a further positive step in the transformation of DuPont's business mix away from more cyclical, lower-margin businesses in favor of more stable, higher-margin businesses, such as Danisco.
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