Fitch rates Tyco notes BB

Fitch Ratings has assigned a BB rating to $1 billion of 10 year notes to be issued by Tyco International Group S.A. and guaranteed by Tyco International Ltd. The outlook is stable.

Proceeds from the new issuance will be used to pay down existing debt and serve to extend the average maturity of Tyco's outstanding debt.

Tyco is expected to replace or renegotiate its 364-day facility, currently $1.5 billion, which expires in January 2004. A renewal or replacement would support short term liquidity that will decline upon the completion of Tyco's outstanding tender offer for $2.5 billion (cash purchase price offer) of LYONs (the offer expires Nov. 17). After the repurchase of the LYONs, Tyco's cash balance of $4.2 billion as of Sept. 30 would decline to about $1.7 billion on a pro forma basis as of Sept. 30.

As there are no significant scheduled debt maturities until the first quarter of fiscal 2005, the combination of free cash flow and borrowing capacity under Tyco's bank facilities should provide ample short-term liquidity.

Future debt maturities will be relatively well distributed with maturities in calendar 2004 and 2005 scheduled to be about $1 billion (in the fourth calendar quarter) and $800 million, respectively. Debt of $3.7 billion due in 2006 represents the largest amount due in any single year and includes $2 billion outstanding under the fully used bank revolver.

The ratings also reflect concerns about legal liabilities relating to shareholder lawsuits and ongoing investigation by the SEC, demonstrating full access to capital markets, completing the resolution of Tyco's debt structure, and successfully executing plans to realign and improve the company's operations. Fitch believes Tyco is taking important and effective actions with respect to these issues, a number of which were announced earlier this week pertaining to restructuring and to the sale of TyCom Global Network and more than 50 other low-margin or non-core businesses.

Further demonstration of the company's ability to reduce debt from operating cash flow, as well as stabilization at ADT Security, could result in a review of the rating in the relatively short term.

© 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.