S&P lowers Parker-Hannifin view to negative

S&P said it revised the outlook on Parker-Hannifin Corp. to negative from stable and affirmed all of the company’s ratings, including its A corporate credit rating.

Parker-Hannifin's debt balance will increase meaningfully following the close of its acquisition of Clarcor because it will issue about $3 billion of new debt to partly fund the transaction, which is expected to leave the company with weak credit measures for the current rating over the next two years, S&P explained.

The acquisition will close at the beginning of the company's fiscal-year 2018, the agency said.

S&P said it anticipate the company’s debt-to-EBITDA ratio will reach the high-2x range at the end of that same fiscal year.

The company is expected to reduce its leverage through planned debt repayment, leading its debt-to-EBITDA to improve modestly to the low- to mid-2x range by the end of fiscal-year 2019, before improving to less than 2x by the end of fiscal-year 2020, the agency said.

After the transaction closes, S&P said it expects Parker-Hannifin to generate annual free operating cash flow in excess of $1 billion and anticipate that management will use the bulk of this free cash flow to reduce the company's debt.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.