TEXT - S&P rates Ecolab's proposed notes 'BBB+'
Dec 10 - Standard & Poor's Ratings Services said today that it assigned its 'BBB+' rating to Ecolab Inc.'s proposed offering of $500 million in senior unsecured notes. The company plans to use proceeds to partly finance its announced $2.1 billion acquisition of Champion Technologies. The existing ratings on Ecolab, including the 'BBB+' corporate credit, rating remain unchanged.
Ecolab's credit metrics pro forma for the acquisition and planned financing are expected to be in an appropriate range for the rating at year-end 2013. Specifically, we expect the ratio of funds from operations-to-total debt to be in the 20% to 30% range in line with our expectations at the company's "significant" financial risk profile. Our view is that the Champion acquisition strengthens the company's market position in the energy services sector and supports the company's current "excellent" business risk profile. Ecolab gained a meaningful presence in the energy services sector through its year-end 2011 Nalco acquisition. We expect the Champion acquisition to deepen Ecolab's presence in this sector, increasing market opportunities. The outlook for revenue and earnings growth in the segment is favorable, though we expect margins in this segment to be lower and potentially somewhat more volatile than Ecolab's overall very stable EBITDA margins, which have been in the 20% area. Still, we do not expect Ecolab's overall pro forma margins to be volatile partly because the acquired company is relatively small with 2011 reported revenues of about $1.2 billion, relative to Ecolab's $11 billion. We expect Ecolab will retain its credit strength through the relative predictability and consistency of its operating results, supported by consistent financial policies that favor improvement to the financial profile