Moody's may upgrade Halliburton

Moody's Investors Service said it placed Halliburton Co.'s Baa1 senior long-term debt rating and Prime-2 commercial paper rating under review for upgrade following the company's announcement of a plan to dispose of its remaining interest in KBR, Inc. via a split-off exchange offer to Halliburton shareholders.

The agency said the review of the commercial paper rating reflects the possibility that the long-term debt rating could be upgraded by more than one notch. Halliburton has received a tax-free ruling from the IRS and expects to complete the separation by the end of April.

In Moody's view, the ultimate separation of KBR's engineering, construction and services businesses, which generate lower margins and are subject to numerous legal contingencies and operational and political risks, will be positive for Halliburton's standalone credit quality as a provider of oilfield services.

The review will focus on the pro forma operating and financial profile of the Energy Service Group, including its operating returns, its liquidity and cash position and its financial leverage targets, and management's intentions for the company's free cash flow, sizable cash balances (expected to be about $2.9 billion post-separation) and shareholder rewards.

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