S&P cuts Alfa Laval to BBB+

Standard & Poor's said it lowered its long-term corporate credit rating on Alfa Laval AB to BBB+ from A-.

The outlook is stable.

The rating was removed from CreditWatch, where it was placed on April 7.

S&P said the downgrade follows the announcement that Alfa Laval completed the acquisition of Frank Mohn A/S (not rated). The agency understands the transaction, valued at about NOK 13 billion (SEK 14 billion or $2.1 billion), has been financed through debt, implying that the company's debt level will almost quadruple at the time of the acquisition.

Although the agency expects a gradual decrease in debt over the coming years, it projects that the increased debt level will cause Alfa Laval's consolidated adjusted funds from operations-to-total debt ratio to weaken to 30%-35% in the next 12 months and about 37%-43% in 2015 following the acquisition (pro forma).

These levels are not commensurate with the previous A- rating, S&P said.

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