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S&P Affirms Cooper Industries & Units Ratings

19 August 1998

S&P Affirms Cooper Industries & Units Ratings Re: Acquis

    NEW YORK, Aug. 19 -- Standard & Poor's today affirmed its
ratings on Cooper Industries Inc. and related entities (see list below). The
outlook is stable.   About $650 million of outstanding rated long-term debt is
affected.
    The affirmations follow Cooper's announcement that it has agreed to sell
its automotive operations to Federal-Mogul Corp. for $1.9 billion. While
business diversity will be reduced, the firm is divesting its lowest-margined
and most asset-intensive segment. Proceeds will be used for debt reduction,
acquisitions, and common share repurchases. Potential transactions are not
expected to weaken the financial profile.
    Ratings reflect good competitive positions for electrical products and
tools and hardware. End-markets, which include the industrial, electric
utility, building construction, and aerospace sectors, 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 a satisfactory pretax return on permanent
capital averaging in the mid-to-upper teens percent range. Moderate 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 sizable, cash flow protection is not
expected to improve sufficiently to warrant an upgrade, given the firm's
active acquisition program and a targeted 35%-45% debt leverage range. An
above-average business profile and a favorable near-term operating outlook
limit downside risk, Standard & Poor' said. -- CreditWire

    OUTSTANDING RATINGS AFFIRMED
    Rating
    Cooper Industries Inc.
    Corporate credit rating                         A-
    Senior unsecured debt                           A-
    Commercial paper                                A-2

    McGraw-Edison Co..
    Corporate credit rating                         A-
    Senior unsecured debt                           A-

    Wagner Electric Corp.
    Corporate credit rating                         A-
    Senior unsecured debt                           A-

    Cooper (U.K.) Ltd.
    Commercial paper                                A-2