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S&P Puts TRW Ratings on Negative CreditWatch

On Feb. 22, Standard & Poor's placed its BBB corporate credit rating on TRW Inc. on CreditWatch with negative implications following Northrop Grumman Corp.'s announcement that is offering to acquire Cleveland, Ohio-based TRW in an equity transaction valued at $47 per TRW share, or $11 billion (including $5 billion of assumed debt.) TRW has said that its board will study the proposal.

"The CreditWatch placement reflects Standard & Poor's expectation that ratings on TRW will be lowered if the company is acquired by lower-rated Northrop Grumman, whose BBB-minus corporate credit rating was affirmed by Standard & Poor's following the announcement of its bid," said Standard & Poor's analyst Lisa Jenkins.

TRW, which generated revenues of $16.4 billion in 2001, produces occupant safety systems, steering and suspension systems, fuel and braking systems, and other electronic and engine components for the automotive industry. It is also a provider of defense systems, space and defense-related electronics, and systems integration and information technologies. Northrop Grumman has said that it expects to promptly separate TRW's automotive businesses, which account for about $10 billion in revenues, following the close of the transaction.

Northrop Grumman is a highly diversified defense contractor, providing airborne early warning and surveillance systems, precision weapons, information technology, and nuclear and non-nuclear ships for the U.S. Navy. The combined Northrop Grumman and TRW defense and aerospace businesses would generate more than $26 billion in revenues in 2003.

Standard & Poor's will monitor developments and take rating actions as appropriate. TRW recently announced the resignation of its CEO, David Cote, who left to become CEO of Honeywell International Inc. TRW has established a chief executive office to direct the company while it seeks a permanent successor. Standard & Poor's will also monitor the decisions by the interim management team, the company's continued commitment to debt reduction, and efforts to improve operating efficiency. From Standard & Poor's RatingsDirect

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