S&P Affirms Textron Inc.'s A-/A-2 Rtgs
12 August 1998
S&P Affirms Textron Inc.'s A-/A-2 Rtgs; Outlk Stable
NEW YORK--Standard & Poor's CreditWire 8/12/98-- Standard & Poor's today affirmed its single-'A'-minus/'A-2' corporate credit, triple-'B'-plus subordinated debt, single-'A'-minus senior unsecured, and 'A-2' commercial paper ratings on Textron Inc. The outlook is stable.The rating affirmation follows Textron's agreement to sell its consumer finance subsidiary, Avco Financial Services, for about $2.9 billion in after-tax proceeds. Management intends to use up to 40% of proceeds for share repurchases, with the rest to fund acquisitions. Standard & Poor's expects that, while Textron's business diversity is diminished initially, acquisitions should enhance already solid competitive positions in continuing operations. Furthermore, cash flow to debt is expected to run in a 40%-50% range, appropriate for current credit quality, with debt to total capital in a 30%-40% range. Management has previously stated that its target for debt to total capital is in the mid-30% area.
Providence, R.I.-based Textron's ratings are supported by the firm's leading market positions in aircraft (helicopters and business jets), automotive parts, and industrial products. Textron's good business diversity and strong overall financial profile also support the ratings. A balanced mix of operations mitigates the cyclicality of most of the company's markets and has contributed to improving performance, resulting in increased earnings and cash flow protection measures in recent years. Looking ahead, results should benefit from a greater focus on core businesses and operating efficiency, new product development, tighter asset management, and generally favorable growth prospects for most of the firm's industries.
OUTLOOK: STABLE
Good operating performance, overall attractive business fundamentals, and a moderate financial policy should result in credit measures consistent with current ratings, Standard & Poor's said.
---CreditWire