S&P affirms Esterline

Standard & Poor's said it affirmed the corporate credit rating on Esterline Technologies Corp.

The outlook is stable.

The agency also said it placed the unsecured debt ratings on CreditWatch with negative implications, reflecting a likely decline in recovery prospects for unsecured lenders due to an increase in secured debt to finance the recently announced proposed acquisition.

The affirmation reflects Esterline's recent news that it plans to acquire Souriau Group for €483 million, which would be its largest acquisition to date, S&P said.

The purchase will be financed with $270 million of cash, a $290 million draw on the company's revolver and a new $155 million international credit facility, the agency said.

The acquisition was contemplated in the March upgrade of the company, S&P said.

Although the agency said it expects pro forma debt-to-EBITDA to increase to about 3x in 2011from about 2.4x now, this is below a previously stated threshold of 4x for a possible downgrade.

The company said it is committed to using excess cash flow to reduce debt, so credit protection measures will likely improve fairly quickly, the agency said.

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