TEXT-Fitch cuts Cooper to 'BBB+' on acquisition by Eaton;outlook negative

Tue Dec 4, 2012 9:38am EST

Fitch has assigned an IDR of 'BBB+' to Eaton and affirmed the ratings for Eaton's indirect subsidiary, Eaton Corporation, at 'BBB+' as described in a separate press release.

The downgrade to 'BBB+' equalizes Cooper's ratings with Eaton and incorporates pro forma debt and leverage for the combined companies which increased materially to help fund the acquisition of Cooper. The Negative Rating Outlook recognizes the potential for sustained high leverage if Eaton is unable to realize expected synergies with Cooper, or if financial results are pressured by a slowdown in the combined company's end markets. Eaton plans to reduce leverage and return to stronger credit metrics within two to three years of the acquisition.

Fitch has downgraded Cooper's ratings as follows:

Cooper Industries plc

--IDR to 'BBB+' from 'A' and withdrawn;

--Senior unsecured bank credit facilities to 'BBB+' from 'A' and withdrawn.

Cooper Industries, Ltd.

--IDR to 'BBB+' from 'A' and withdrawn.

Cooper U.S., Inc.

--IDR to 'BBB+' from 'A';

--Senior unsecured bank credit facilities to 'BBB+' from 'A' and withdrawn;

--Senior unsecured debt to 'BBB+' from 'A';

--Short-term IDR to 'F2' from 'F1' and withdrawn;

--Commercial paper to 'F2' from 'F1' and withdrawn.

The ratings affect approximately $1.1 billion of debt outstanding at Sept. 30, 2012, excluding $325 million of debt that matured Nov. 15, 2012.