Moody’s might cut Whirlpool

Moody's Investors Services said it placed the Baa2 senior unsecured and Prime-2 short-term ratings of Whirlpool Corp. under review for downgrade following the company's July 10 announcement that it entered into an agreement to acquire about 66.8% of the voting stock of Indesit Co. SpA.

The initial part of the transaction is valued at roughly $1 billion.

The proposed acquisition will be done through two separate binding share purchase agreements and a mandatory tender offer for the remaining shares after the transaction closes. Whirlpool will pay $15.06 per Indesit share, a 5% premium from the July 10 closing price. Whirlpool expects to fund the transaction entirely with debt.

Moody’s said the rationale for the review for downgrade is the increase in leverage that will result from the proposed acquisition and the deterioration in operating margins.

"We expect that adjusted pro forma leverage will be between 3 and 3.5 times debt/EBITDA, above our downgrade trigger of 3 times," Moody's senior credit officer Kevin Cassidy said in a news release. "However, any rating downgrade would likely be limited to one notch."

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