Fitch Expects to Rate Stanley Black & Decker's Proposed Senior Unsecured Notes Offering 'A-'

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings expects to assign an 'A-' rating to Stanley Black & Decker's (NYSE: SWK) proposed offering of senior unsecured notes. The new issue will be equal in right of payment with all other senior unsecured debt. Proceeds from the notes offering will be used to reduce borrowings and for general corporate purposes.

Fitch currently rates Stanley Black & Decker as follows:

--Issuer Default Rating (IDR) 'A-';

--Bank credit facilities 'A-';

--Senior unsecured notes 'A-';

--Convertible notes due 2012 'BBB+';

--Junior subordinated notes 'BBB';

--Short-term IDR 'F2';

--Commercial paper (CP) 'F2'.

Additionally, Fitch rates Black & Decker Corporation (BDK) and Black & Decker Holdings LLC as follows:

--IDR 'A-';

--Senior unsecured notes 'A-'.

The Rating Outlook is Stable.

The ratings and Outlook for SWK reflect the cyclicality of certain of the company's end-markets and integration risk associated with its recent merger with BDK, although overall risk is mitigated by considerable liquidity, expectation of decreasing leverage, and substantial cost synergies of at least $350 million. Revenue growth, enhanced by the acquisition, as well as reduced costs at BDK should expand future cash flow.

SWK has demonstrated conservative financial management over the past decade which is expected to continue. The combined company has strong liquidity and access to capital markets and debt reduction is a primary goal. Leverage, while currently higher because of the BDK merger, is forecast to decline reasonably quickly over the next two years. Fitch expects leverage as measured by total debt with equity credit/EBITDA to fall below 2 times (x) by the end of 2011.

SWK has solid liquidity with $1.6 billion of cash and approximately $1.16 billion of availability under its CP program as of June 30, 2010. Fitch expects free cash flow to approximate $400 million during 2010. Free cash flow is expected to be significantly higher once transaction and restructuring costs are absorbed, which will be heavier in the first year following the merger.

The end-markets for the combined company are generally cyclical. However, BDK has a stronger correlation to the residential housing market (primarily repair/remodeling) and the consumer sector, and therefore tends to come out of recessions earlier than Stanley's more industrial/commercial focus. Fitch believes the economy is stabilizing, which should lead to improvement in margins on volume growth. In addition, both companies are in similar lines of business and SWK has considerable experience in integrating acquisitions, which should minimize the problems associated with the assimilation of BDK.

Additional information is available at 'www.fitchratings.com'.

These rating actions reflect the application of Fitch's current criteria, which are available at 'www.fitchratings.com' and specifically include the following:

--'Corporate Rating Methodology' (Aug. 13, 2010);

--'Liquidity Considerations for Corporate Issuers' (June 12, 2007.

Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=546646

Liquidity Considerations for Corporate Issuers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=328666

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