Moody's may cut Ingersoll Rand

Moody's Investors Service said it placed the A3 long-term rating of Ingersoll Rand Co. Ltd. on review for possible downgrade following the company's announcement that it has executed a definitive agreement to acquire Trane, Inc. in a transaction valued at $10.1 billion.

The agency noted that Ingersoll's Prime-2 short-term rating is affirmed and is not under review.

The purchase price for Trane will consist of $2.5 billion in Ingersoll common shares and $7.3 billion in cash, Moody's said, adding that if the funding and execution of the transaction proceed as expected, it is likely that upon closing Ingersoll's long-term rating will be lowered to Baa1 and that the outlook will be stable.

However, the ultimate rating outcome will be determined by several factors including: the amount and term of the debt issued to help fund the $7.3 billion cash component of the purchase price, the degree to which the acquisition of Trane is implemented in a manner that does not result in structural subordination of Ingersoll's rated debt and, Ingersoll's ability to maintain prudent levels of liquidity to backup any resulting levels of short-term debt, the agency said.

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