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S&P Rates Cooper Industries

6 April 1998

Cooper Industries Inc. Ratings Affirmed by S&P; Outlook Stable

    NEW YORK, April 6 -- Standard & Poor's today affirmed its
ratings on Cooper Industries Inc. and related entities. (see list below).  The
affirmation follows the firm's announcement that it has retained Merrill Lynch
& Co. Inc. to advise it on alternatives for the Automotive Products segment
that will enhance shareholder value. The ratings outlook is stable. About $600
million of long-term debt is affected by this rating action.
    A number of alternatives are being considered for this segment, which
represents about 34% of consolidated revenues, including an initial public
offering, sale to another company, or a spinoff directly to Cooper
shareholders. Following the expected disposition, Cooper's business portfolio
will be less diversified, but remaining operations have higher margins and
returns. Proceeds will be used for debt reduction, and for possible
acquisitions and common share repurchases. No change in the financial profile
is expected as potential transactions are expected to be earnings and cash
flow neutral.
    Ratings reflect good competitive positions for electrical products and
tools and hardware. End-markets, which include industrial, electric utility,
automotive and aerospace, are moderately cyclical. However, a significant
portion of sales goes to more stable replacement and retrofit markets,
limiting earnings and cash flow volatility. Cooper is expected to generate
satisfactory pretax return on permanent capital averaging in the mid-to-upper
teens percent. Moderately aggressive financial policies and continued focus on
cost reduction and productivity improvement should result in satisfactory cash
flow protection, with funds from operations to total debt averaging about 45%.

    OUTLOOK: STABLE
    While free cash flow generation is substantial, cash flow protection is
not expected to improve sufficiently to warrant an upgrade, given the firm's
targeted 35%-45% debt leverage range. An above-average business profile and a
favorable near-term operating outlook limit downside risk, Standard & Poor's
said. -- CreditWire

    Cooper Industries Inc.
    Corporate credit rating          A-
    Senior unsecured debt            A-
    Commercial paper                 A-2
    McGraw-Edison Co.
    Wagner Electric Corp.
    Corporate credit rating          A-
    Senior unsecured debt            A-
    Cooper (U.K.) Ltd.
    Commercial paper                 A-2

SOURCE  Standard & Poor's CreditWire