Fitch Rates Newell Rubbermaid's Proposed New $350MM Notes 'BBB'
CHICAGO -- November 29, 2012
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 interest.
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
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 2015.
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
--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
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Grace Barnett, +1-212-908-0718
One State Street
New York, NY 10004
Wesley E. Moultrie, II, CPA, +1-312-368-3186
Robert P. Curran, +1-212-908-0515
Brian Bertsch, +1-212-908-0549
New York, Media Relations
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