Nov 29 - Fitch Ratings has assigned a 'BBB' rating to Newell Rubbermaid
Inc.'s (Newell) proposed $350 million senior unsecured notes.
Fitch currently rates Newell as follows:
--Long-term Issuer Default Rating (IDR) 'BBB';
--Short-term IDR 'F2';
--Commercial paper 'F2';
--$800 million revolving credit facility 'BBB';
--Senior unsecured notes and 5.5% convertible debt 'BBB'.
Proceeds will be used to repay the company's 5.5%, $500 million medium-term note
maturing on April 15, 2013. Cash on hand and short-term borrowings are expected
to be used to repay the remaining $150 million.
Newell continues to reduce overall debt balances. At Sept. 30, 2012, debt
totaled $2.2 billion, down significantly from the almost $2.9 billion peak
reached in 2008. Leverage has also declined. Total debt-to-operating EBITDA was
2.3x at the last 12 months ended Sept. 30, 2012, down from 3.2x at the end of
2008. Nonetheless, Fitch expects debt and leverage to remain near current
The new note contains a Change of Control Repurchase Event. Upon the occurrence
of both a Change of Control and ratings below investment grade by at least two
of the three rating agencies and unless Newell exercises its right to redeem the
notes, the company will be required to make an offer to purchase the notes at a
price equal to 101% of the aggregate principal amount plus accrued and unpaid
Newell's 'BBB' IDR reflects the firm's strong brands, considerable liquidity,
and it's focused operating and financial strategy. The ratings also encompass
the cyclical nature of a significant portion of the company's global business
units as well as some commodity exposure, albeit at much lower levels than
several years ago.
The Stable Outlook reflects Newell's resumption of organic revenue growth since
2009, strong cash flow generation, and Fitch's expectation that
shareholder-friendly actions will be prudent. There is cushion in the rating to
accommodate bolt-on acquisitions or a prudent level of share repurchases as long
as leverage (total debt with equity credit/EBITDA) remains in the 2x to 3x
Fitch expects some pressure on core (organic) revenue growth given the company's
moderate level of sales from developed markets in Europe. However, it should
continue to be offset by growth in developing markets. Newell's developing
markets, which represent approximately 15% of sales has grown approximately 12%
year to date and the organic growth has remained positive at 2.2%. Newell is on
track to meet its organic growth rate goal of 2% to 3% in 2012. In addition, the
company's focus on cost control and Fitch's expectation that commodity prices
have stabilized somewhat should ensure that profits and cash flows remain
relatively stable. It is noteworthy that despite the fact that Newell has been
restructuring for much of the past decade and will continue through 2015 with
the recent expansion of Project Renewal, the firm has generated positive free
cash flow since at least 1996.
For the nine months ended Sept. 30, 2012, revenues increased 0.3% to $4.4
billion with organic growth (volume/price/mix) of 2.2% partially offset by
negative foreign exchange translation of (1.9%). Adjusted EBITDA for the
nine-month periods ending Sept. 30, 2012 and 2011 have been relatively flat at
approximately $735 million.
Newell's free cash flow (FCF) has rebounded to more than $250 million in each of
the past three years from a cyclical low of $63 million in 2008. Year to date
FCF is $145 million versus $67 million in the same period last year. Fitch
expects FCF in the $250 million range in 2012.
Newell's financial flexibility is ample with more than $963 million in liquidity
and solid access to the capital markets. As of Sept. 30, 2012, the company had
$250 million in cash on hand and $713 million available under its $800 million
revolving credit facility which matures in December 2016. The $200 million
364-day receivables facility which matures in September 2013 was fully utilized.
Except for the $500 million 5.5% note maturing in 2013 which will be repaid,
there are no other long-term debt maturities until a $250 million note due in
What Could Trigger a Rating Action:
Future developments that may, individually or collectively, lead to a positive
rating action include:
--A change in Newell's portfolio of businesses such that there is less
cyclicality. This could be accomplished by either reducing the percentage of
cyclical business segments, such as Tools or Commercial Products, or increasing
the company's geographic diversity away from large developed markets such as the
U.S. Project Renewal's expansion to invest savings in 'Win Bigger' business and
emerging market growth will be supportive of this change over time.
--Operating with leverage at or below 2x.
Future developments that may, individually or collectively, lead to a negative
rating action or negative Outlook include:
--A lengthy recession given that Newell's profitability and cash flows have
historically bounced back to normal levels within 12-18 months after the end of
previous economic downturns;
--Leverage of more than 3x which could be caused by a change in management's
financial strategy or a sizeable debt-financed acquisition. Neither of these
events are contemplated.
Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 8, 2012).
Applicable Criteria and Related Research:
Corporate Rating Methodology